Dropshipping vs. Owning Inventory: Which Will Work Best for You?
The eCommerce world is exciting. Even if you start off dropshipping, it’s possible to build your own stock by making wholesale purchases, branding your products, or manufacturing.
Dropshipping is a great option for small businesses that want to be successful in online commerce. However, you might not feel comfortable with managing physical inventory. Dropshipping is a fun way to get started in eCommerce. You can also make your own products, wholesale, or manufacture your own.
What’s Dropshipping?
Dropshipping is a form of supply chain management where a retailer does not keep physical product inventories but instead transfers customer orders to a wholesaler or manufacturer who then ships the products directly to the customer.
This basically means that customers receive their products directly from third-parties. Dropshipping is not an option for online retailers.
How does dropshipping compare to owning stock? You, the selling merchant, don’t have stock to ship or own inventory in comparison to standard retail shop owners. To fulfill orders, you will need to contact a manufacturer, wholesaler, or another retailer in order to ship the items to your customers. This contrasts with the model of having your own stock in warehouses, fulfilling orders and shipping them directly.
What are the Pros and Con of Dropshipping?
Dropshipping is just like any other business model. It has its advantages and disadvantages. Let’s begin by reviewing the benefits of dropshipping in eCommerce.
Pros:
- Low risk: It’s great to be safe. This makes it an excellent choice for both businesses that are just getting started in eCommerce and those who prefer to take a more conservative, cautious approach. Dropshipping reduces the risk of starting an online business. You can avoid the hassles associated with picking, packing, and shipping products, as well as the high overhead costs that comes with owning stock.
- Minimum Startup Capital: Dropshipping products do not require you to invest in inventory before selling. This means that it only requires minimal capital.
- Dropshipping is easy to manage. You don’t have to own physical products. As such, you can rent or manage a warehouse to pack, ship and staff orders. All of these tasks are done by a third party.
- Dropshipping can be operated remotely: As long as there is an Internet connection, you can communicate with your customers and third-party suppliers, retailers, or manufacturers from any location.
Dropshipping offers many other benefits, including a greater selection of products and less stress in managing an inventory.
Cons:
Dropshipping has its downsides. Some of these disadvantages include the following:
- Third-Party Mistakes: Sometimes, mistakes can be made by suppliers, manufacturers, or other retailers that you have used for dropshipping. If this happens, you must take responsibility for the situation and apologize to your customers. You should be prepared to correct any errors as soon as they occur, whether it is missing items, poor packing, delayed delivery, or botched shipments.
- Lower Profit Margins: Whether you’re selling products through Shopify, Amazon Dropshipping, or eBay Dropshipping, merchants’ profit margins will generally be lower. To make significant profits in the highly competitive world of eCommerce, you must maintain recurring sales.
- Minimum Assurance on Inventory Flow Third-party inventory control means that certain products may not be available at the time your customers request them. This can lead to retailers accepting orders for products that aren’t currently available.
- Lower Barriers to Entry: Many people are starting to adopt this eCommerce model because it is easy to set up and requires little capital. This explains why there is so much competition, as many online retailers are selling the same items.
What is inventory?
Inventory is simply a list of products you have in stock and ready to sell. These are typically finished goods that are kept in a location where they can be shipped to customers. Inventory is an accounting term used to measure the stock of products in a company. If you are an eCommerce retailer, your inventory will likely be your greatest asset.
Regular inventory is essential to ensure that your business can handle all aspects such as shipping, ordering, and handling. You can set targets and create a system to replenish stock by carefully managing your inventory.
What are the pros and cons of having inventory?
Dropshipping is similar to having your own inventory. However, there are pros and cons. Here are some things to consider.
Pros:
- Improved Customer Service: By keeping your products in-store, you can eliminate any middleman and provide better customer service. Customers’ complaints won’t surprise you and will allow you to maintain strict quality control.
- Bulk Discounts If you order more products, your suppliers and manufacturers may be able offer significant discounts. You should always order more than you think you will need in order to receive these discounts. If you have excess stock you can always find creative ways to dispose of it without affecting your bottom line.
- Provided a Branded experience: Because you handle inventory and orders, you can customize the packaging to suit your customers’ needs. This allows you to offer 360-degree branding with custom packaging. Easyship even lets you create tracking pages and packing slips! You can also include special discounts, treats or other offers in your package to increase customer loyalty and encourage repeat purchases.
Cons:
- You need space: Having an inventory of your products means that you will need somewhere to store them. You might need dedicated space in your office or home. You might need to locate a warehouse or storage area if you have large inventories. This could lead to additional costs.
- More work: Owning and managing your inventory can be very difficult. It is necessary to keep track of stock levels and manage ordering, planning, delivery, and other logistics. You will likely also need to manage packing and shipping. Although Easyship makes this easier, it is still something you must think about.
- The cash outlay: In order to have inventory you will first need to spend enough money to purchase it. If you are just getting started in eCommerce, this may not always be possible.
Choose Between Dropshipping or Inventory
Dropshipping and inventory have their advantages and disadvantages. They won’t work in every business. Here are some things to think about when deciding on the best method for your online shop.
- Are you in need of capital? You need to have enough inventory to buy products for your business. This will allow you to create your own stock. If not, dropshipping is a better option.
- Are you a busy person? Dropshipping is more expensive than keeping your own product stock. You will need to manage and order stock as well as pack and ship orders to customers. This takes time. Dropshipping is a good option if you prefer to have someone else do the heavy lifting.
- Are you concerned about quality control? Dropshipping requires you to have confidence in your suppliers’ ability to deliver quality products and handle your orders correctly. Dropshipping is a way to control your inventory and how satisfied customers are with your company.
How to transition from dropshipping to owning your own stock
After carefully considering all the pros and cons to dropshipping, it may be possible to make the transition to owning your stock. These steps will make it easier to transition from dropshipping to buying products from manufacturers, or to create your own brand.
- Design the product’s initial design
- Do thorough market research
- If you don’t want to make the products yourself, find a manufacturer.
- Create a business plan.
- Develop your unique product line
- Develop effective product packaging
- Implement distribution channels and a logistics plan
- Differentiate yourself from your competitors
- To introduce your products, create and use a solid marketing strategy
- Maintain your website and social media accounts current with new content
- Superior customer satisfaction compared to other competitors
How easyship can help
Easyship provides a variety of shipping options that will allow you to fulfill customers’ orders year-round.
Easyship provides access to many countries all over the globe, allowing you to access a global market and extremely competitive shipping rates. This can increase your profits and give your business a boost. It also breaks down the barriers to global eCommerce. Easyship makes it easy to have your own inventory and ship all over the world.
The shipping rate calculator is a great tool to determine the total cost of shipping and fulfillment. Our international shipping guide and taxes guides are great resources to help you get ready to manage your stock and possibly start shipping across-border.
Conclusion
Dropshipping can be a great way to get into eCommerce. But, owning your stock can help you increase your profits and better manage your inventory.
Easyship is here to assist you in your transition from dropshipping into owning inventory, as your business grows and scales to new heights.
