What Is Dropshipping? How Do I Know if It’s Right for Me?
The e-commerce world has been taken by storm by a new selling method called dropshipping. Now more than ever, new online retail business are able to offer a wider range of products without having to actually purchase and store it themselves.
Traditionally, businesses would have to buy their own inventory through various wholesale vendors, and then keep all that product on hand at their location. Then, once an order has been placed, the item is removed from the inventory, packaged, and shipped out to the customer. Every step is done in house by the e-commerce business.
Now, e-commerce businesses have the option to set up dropshipping as a way to supply their inventory. The business will simply choose a dropshipping merchant or wholesaler to work with and choose which items they would like to sell on their site. When an order has been placed, the dropshipping company will be notified, and the items will be packages and sent out from there. Other than providing a shoppable site and customer service, the rest is left to the dropshipping merchants or wholesalers.
Both are great selling options that have been adopted by online boutiques. However, it is important to know that each of them have pros and cons that come with them. I have listed some of the major ones, but it is up to you to weigh your options and decide which will be more beneficial to your business.
Here is a list of the pros and cons associated with dropshipping:
Pros of Dropshipping
Dropshipping has become very attractive to online boutique owners because it eliminates the need to buy, store and ship inventory.
As we have discussed in other blogs, inventory is probably the most expensive start up cost. Therefore, this may be a great option for you if you have a limited budget or are hesitant on taking on a risk with overhead. With dropshipping, you are not purchasing inventory, rather making an agreement to sell products that are owned by a third party. Your boutique acts as a middleman between the customer and the wholesaler or manufacturer.
Purchasing physical inventory can also become quite overwhelming if you do not have adequate space to store it all. The more successful your boutique becomes, the more inventory you are going to need to maintain your shop. For boutique owners housing their own inventory, they will have to be conscientious of their inventory levels since they have a limited amount of space to store it. Eventually, a lot of these owners must seek elsewhere to store inventory once they have reached an amount that they can no longer keep at their home. If you are dropshipping, you will be able to expand and grow your boutique without having to worry about outgrowing your space.
Not only will you save on inventory, but it also saves you money on packing and printing materials. Once an order has been placed, the dropshipping manufacturer is notified and they send out the order. All the physical work is done by them, so this saves you time and energy. It also saves you countless trips to the courier!!
There are a ton of dropshipping manufacturers and wholesalers out there, so you should have no issues finding one that fits your style!!
As I have stated in my blog post Where to Purchase Inventory for an Online Boutique, quality vendors are sometimes hard to find. They are out there and there are a ton of them, but they are usually over shadowed by the wholesale sites that are super cheap and don’t require any certifications. I want to make sure you work with legitimate and good quality vendors, so I have done all the research for you!!! I have compiled a list of dropshipping vendors to choose from. All you have to do is find which ones best fit your boutique and vision.
CLICK HERE to purchase your dropshipping vendor list.
*Vendor lists have clickable links to take you right to the sight. No hunting around for the right link!!!
Cons of Dropshipping
Dropshipping is great because it takes a lot off your hands. However, it also takes away a lot of the control.
You are the boutique the customers are shopping at. They do not know that you are simply the middleman between them and another company. So, if issues with inventory arise, they are going to come to you for resolve. Unfortunately, you never see the products you are selling for yourself. My question to you would be: “How do you know you are selling quality products?” I personally like to be able to physically have my inventory in hand. That way I can inspect each article of clothing that comes in, I can try it on to make sure I like the way it fits, and seeing the quality helps me price my items accordingly. If I get a bad batch of product or something is missing/damaged, I can fix the issue with my vendors before it even becomes available to the customer. That way, I have less of a chance of having products returned for damaged/defective reasons.
Similar issues can come up with shipping. If your customer experiences any problems with their packages, guess who they will be contacting? Yep, YOU! The problem is you didn’t ship the order. It is hard to give great customer service when you don’t have total control over all the aspects of your boutique. I know issues can still arise with the couriers no matter who you use. But as part of opening a boutique, you make plans for this. You will have a system or policy in place that you can adhere to if you have a customer experiencing a lost or damaged package. You won’t have to play the back-and-forth game between you and the customer and then you and the dropshipping manufacturer.
Have you ever ordered from a company and your order arrives in what seems like 10 different packages? Nothing arrives together or at the same time. Well, this can happen quite a bit with dropshipping. A single order can be shipped from multiple manufacturers, at different times, and through different couriers. Sounds like a tracking nightmare! It is situations like this that make solving customer issues harder than they need to be.
If you have dreams of creating a brand, really making your boutique stand out from the rest, then dropshipping might not be the best option for you. Dropshipping offers essentially no way for you to customize your orders. You cannot ship your orders in custom packaging, you cannot place freebies, coupons or thank you notes in with the orders, and you cannot place custom tags on your products. When our customers receive an order, they are essentially receiving a little piece of us and our boutique. This is what makes us memorable! If you play no part in anything beyond offering a website to shop on, then are you really leaving a lasting impression that will have them wanting to come back for more? Not every customer needs all the fluff and are just happy to get quality products. But to some, feeling like the boutique owner took a little extra time to include a little something special means the world to them. While not necessary, this can help build a lasting relationship with your customers.
Lastly, we must look at profit margins.
Scenario 1: You purchase all your inventory and are responsible for packaging it and sending it out to your customers. When you make a sale, you will make 100% of the profit, minus the cost of shipping and tax. If you offer free shipping, you are still responsible for the cost of shipping. That free is for your customer, not for you.
OR
Scenario 2: You participate in dropshipping and do not have physical inventory on hand, nor are you responsible for shipping the products. When you make a sale, you will only earn a certain percentage of the profit. You are a middleman selling products that are not technically your own, so it is to be expected that you must share the profits with the original manufacturer or wholesaler. You are still responsible for collecting tax and paying shipping fees charged by your dropshipping manufacturer.
It is important to note that while you are making more on your sale, such as in scenario 1, the cost of supplying your boutique is much greater. You won’t see a significant amount of money going into your pocket until you make enough to sustain your boutique AND pay yourself. In scenario 2, you may not make as much on a single order, but with very little overhead you should ideally be able to afford to start paying yourself much faster.
So, What’s the Verdict?
I know this leaves you with a lot to think about, but just know that there is no right or wrong answer here. You must decide what is going to be best for you and your boutique. Just know, that when starting out, each one comes with its own pros and cons.
I decided to go the more traditional route and purchase all my own inventory. While I love having control of my product, it took a long time before I made any significant profit. For a while, everything I was making was going back into my business. Any profit that I made was being used to purchase new inventory or paying my monthly fees. It was important for me though to be able to have control over everything so that I could ensure that I was creating the best version of my boutique that I could, all while offering exceptional customer service.
I don’t think dropshipping is a bad option, I just don’t think it is right for everyone. However, if this is what will help you launch your boutique, then I say GO FOR IT!! The important thing here is to START. If dropshipping will do that for you, then you’ve made the right choice in choosing to go that route. You can always step away from it and begin purchasing and selling your own inventory once you have become more established and started making some money.
Do your research and create the best shopping experience possible!
As long as your heart is in it, it doesn’t matter how you get there, just that you do!
XO – Kristina G.
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