What is dropshipping?
Dropshipping is a business model in which an online store does not have the stock it is offering for sale. Instead, when a customer places an order, the store purchases that item from a third party who will then ship it directly to the buyer.
In other words, the online store is a middleman who takes orders from customers, and then forwards them to a supplier or manufacturer for fulfillment on their behalf.
At first glance, dropshipping seems like a no-brainer: no upfront investment and no stores to manage.
But the reality of this online sales system is more complex than it appears. So let’s try to see more a little more clearly.
When is it recommended to use dropshipping?
We are going to examine four cases where Algeria Email List dropshipping represents an interesting solution for an e-merchant to consider.
1. A tool for doing market research.
First, think of dropshipping as a means to an end, not an end itself.
While a long-term commitment to dropshipping isn’t necessarily viable, using it for temporary projects can be extremely valuable, especially in the market research arena.
So, dropshipping helps mitigate the risks of trying new products and can be used as a way to test a new product or a new market.
Rather than increasing your inventory management costs by filling your warehouse with an unpredictable product, therefore test it over a given trial period using the dropshipping method.
Apart from finding out whether that product is selling well or not, you will also have a better estimate of its selling price, which will give you a more accurate number of how much merchandise to buy for your initial inventory.
Dropshipping can be a great way to try out new types of products that always come with inherent risk in selling.
2. A way to protect against overselling.
The big e-commerce brands know that market fluctuations are not always predictable. So rather than increasing inventory costs by overstocking your merchandise, find a dropshipping supplier as a backup that can save you money without losing those sales.
This is especially useful for times of high season, where you can be easily overwhelmed.
This will give you the means to reduce your costs by only stocking the quantity of goods that will surely sell, and if an unexpected demand for sales arises, you can satisfy them with a dropshipping solution.
This is an excellent guarantee against the uncertainties that all retailers face.
3. A strategic solution for shipments of a certain type
Some of the consequences associated with developing an online sales business include complications related to shipping the goods. The further away you are from your warehouse or distribution centers, the heavier your shipping costs will be.
Dropshipping can then represent a good solution for certain locations that are outside your profitable regions.
For example, you may find that the shipping costs are too high for a given destination, or that the storage prices are too high to justify the creation of a new shipping center.
The concern could also be a problem with taxes or additional charges, such as when you are shipping goods overseas. Relying on dropshipping for certain geographic areas can therefore be decisive in keeping your sales afloat.
In addition, as we have seen the interest of dropshipping as part of a market research, you can also use this online sales method to test new business territories.
In that case, why not use dropshipping for a trial period in a new region to see if it’s worth opening a new distribution center there?