Dropshipping has recently seen an astronomical rise in popularity in online commerce. It’s a concept on online retailing in which the retailer doesn’t require to keep products in stock. Instead, a business sells the product by redirecting the online order to a third-party supplier. The supplier then ships the product to the customer.
As the world sees an unprecedented spike in online selling and purchasing amid the COVID-19 pandemic, dropshipping is likely to here. With increasing demand for eCommerce services like Magento 2 development, this method of online sell only becomes more dominant. However, if you are new to the idea of dropshipping, take the initial steps very carefully. Understand all the benefits and drawbacks of dropshipping before your redirect sales to a third. This blog post should give you useful insights into dropshipping. Read on!
Major Dropshipping Challenges Online Retailers Face
From disappointing profits to inferior product quality, dropshipping could create havoc on your business if not managed properly. Here’s a list of major obstacles.
1. Lower Profits
Directing your product sales requirements to another seller creates major roadblocks to your profit and sales revenue. This means you will have to scale up business intensity and the number of sales to reach desired profit margins. Your total profit would now majorly determined by order traffic. Maintaining higher traffic could be challenging in a competitive market. Businesses using eCommerce services such as Magento 2 development will have some advantages in terms of traffic.
Also read this : Top 7 E-commerce Trends In 2020 To Maximize Sales
2. Ruthless Competition
Even a new small business can start dropshipping since it requires a low capital. This means the dropshipping market is much more overcrowded than the overall eCommerce industry. Worse yet, the same products could be sold by multiple sellers. Also, a single supplier would be taking orders from different retailers. So several additional layers of competition add up to dropshipping.
3. Compliance Issues
Countries around the world are making their eCommerce rules stricter than ever before. While using dropshipping, you might be sailing risky waters. Even though you follow all regulatory requirements, your supplier might not. This may get you into trouble that you never saw coming.
4. Supply Chain Disruptions
When you completely rely on a third-party supplier for meeting your delivery needs, you’re no more the master of your supply chain. A lot of things now depend on your supplier. Besides, you might be having a hard time dealing with fulfillment and return policies, among other things.
5. Uncertainty Around Branding
Your brand is what keeps your online business up and running in a competitive market. Building a brand reputation has become even more crucial during these times of lockdown and social distancing. That’s why dropshipping is preferable for an already established brand rather than a business that has just started. Dropshipping makes your brand reputation significantly dependent on the supplier you choose.
All these challenges together could create formidable roadblocks to your online business. The good news is that these can be managed with a strategic dropshipping plan.
Strategically Manage Dropshipping Challenges
Dropshipping doesn’t have to be all doom and gloom if you know how to do it the right way. Use the following steps to make your dropshipping efforts efficient and profitable.
1. Know you market
Extensive market research and customer analysis will not just help you make a dropshipping plan but also a long-term growth strategy. Initially use dropshipping at a smaller scale. This would enable you to understand the market and mitigate risks at the same time.
2. Manage Inventory Costs
Don’t increase your inventory costs by overstocking in the anticipation of higher demands. Instead, use dropshipping as a back up to save significantly on inventory management. Dropshipping also offers you a secure option for uncertain times like the ones we are going through these days due to the pandemic.
3. Dropshipping for High-maintenance products
Some products demand disproportionately higher maintenance costs and effort. The best way to deal with such products is to adopt dropshipping. For such products, dropshipping could bring higher profits than selling those o your own. Products requiring higher maintenance include fragile goods, heavy products, large products, and valuables like jewelry, among others.
4. Choose Your Suppliers Wisely
Finally, it all boils down to the suppliers who meet the delivery requirements of your customers. It’s a business partnership between you and the supplier you choose. So make this partnership carefully. Make sure that the supplier has a track record of delivering authentic and high-quality products. Also, thoroughly discuss the supplier’s shipping and return policies. You must also ask them about the regulatory compliance of the supplier.
If you take this approach to dropshipping then the challenges mentioned earlier in this blog cannot do any harm to our businesses. Also, be careful about what kind of eCommerce platform you use. The eCommerce solutions market now offers platforms with great efficiency, such as Magento 2 online stores. You just need to hire a Magento developer and get a desirable solution that suits your needs.
At Magento Developer Group, we build powerful eCommerce solutions for every kind of business. Being a tech-driven Magento 2 development company, we committed to using the best and most evolved software platforms. Follow our blogs to stay updated about the interesting stuff happening in the world of eCommerce.
Frequently Asked Questions
Q. What is dropshipping?
Dropshipping is an online order fulfillment concept that does not require a business to keep products in stock. The retailer passes on the sales order to a third-party supplier. Then the supplier ships the order to the customer. Dropshipping is becoming popular in eCommerce.
Q. How do I start a dropshipping business?
You need to launch an online business first for starting dropshipping. You can choose eCommerce platforms like Magento 2 to build an online store.
Then follow these steps:
• Select a market niche.
• Do market research.
• Partner with a supplier.
• Create a customer acquisition plan.
• Start dropshipping products.
Q. How much does it cost to build a Magento eCommerce store?
The development cost for a Magento eCommerce store depends on your requirements. If you need a basic online store with limited features, the cost will lower. Magento Developer Group offers feature-rich online stores at competitive pricing.