In a traditional ecommerce site we see sellers selling the products that they have in stock (like a typical brick and mortar store). There is another business model in ecommerce that does not require the seller to stock goods and that is the ‘Drop shipper’. In this the seller has an ecommerce site that looks and works like a typical site and when the orders come in, the owner sends those order details to various manufacturers who directly send them to the customers.
There are advantages of a drop shipper business model, some I am listing below:
- Easy to start: All you need is a computer, working internet connection and an ecommerce website and marketing for which you can hire an expert ecommerce website development company.
- Zero Capital Investments: In a traditional ecommerce store you need to build up inventory and for that you have to order the inventory from a manufacturer or a distributor and then hire a warehouse to store and manage this inventory. You have to pay logistics charges to get the inventory to your warehouse and have to pay expenses for staff at the warehouse etc., At various steps you need to make good investments and for that you need to invest capital. In a drop shipping business you save cost of all of this as you have someone else fulfilling the order.
- No accounting nightmares: The only accounts a drop shipper has to maintain is of the orders he got for his manufacturers that he has tied up with. A traditional eCommerce store has staff salaries, cost of maintaining stock, purchase orders from manufacturers etc., and maintain accounts for each of these.
- Lower risk: Since your business is only dealing with generating orders for manufacturers you have tied up with the risk is lower compared to a traditional ecommerce company that has to deal with possible losses caused by accidents, fire, law suits etc.,
- Mobility: In a drop shipping business your business can be based out of any place and you can move your office/location of work easily as you virtually just have a computer or a few computers to move. This is not that easily possible with a traditional eCommerce website.
- Sell anything and everything under the sun: Since you can become the drop shipper of many manufacturers you can sell as many diverse products as you want.