According to Statista in 2017 retail e-commerce sales worldwide amounted to 2.3 trillion US dollars and it is projected to grow to 4.88 trillion US dollars in 2021. It is a huge market and you could surely get a piece of that online retail pie.
Starting your retail business is probably one of the most popular and tested startup ideas. However, there are several possibles ways how one can start e-commerce empire. There is a traditional way of holding all of your inventory in the warehouse and performing all order fulfillment by yourself. Also, there is a drop shipping business model that makes e-commerce available to much more people.
In this article, I am going to explain to you the differences between both retail business models and you will then understand why drop shipping is the future of e-commerce.
Individual Product Sourcing
The standard retail business model requires a lot of investments in the beginning as you need to buy all items that you would sell and buy it in large quantities as well as to rent or buy your own warehouse to store all of your products. This requires a lot of time and effort and might include costly third parties such as cargo shipments and export-import agents. Also, it can increase the prices of your products as you might need to pay customs in advance.
Drop shipping is much easier and it allows online retailers to sell products in large quantities without worrying about sourcing the products or being afraid to get out of stock. There are online platforms for drop shippers such as Shopify and BAAP store that allows to easily set up your store without much of investment and start selling products right away. Shopify even has an app called Oberlo that allows quick and easy importation of products from AliExpress wholesalers to your e-store and gives you a lot of functionality.
No Time Wasting Fulfilling Orders
When you open your e-store I do not think that you would like to fulfill orders by yourself. Perform all the product packaging and shipping services. One can outsource such things as Amazon FBA but it still takes a lot of time to set up everything and get started.
The dropshipping on the other hand does not require any of that. You send customer orders to the suppliers and they pack and directly sends the product to the customer.
Scalability
It requires a lot of investments to scale a conventional e-commerce store. One needs to buy bigger or new warehouses, more products onwards, increase marketing budget and hire more people to fulfill the orders. This is not only expensive but also time-consuming.
To perform scaling in drop shipping is a much easier task. You can just increase your marketing budget and customer services expenses. You do not need to worry about warehouses and other overhead costs because everything is taken care of by your supplier.
Easy Photo Importation and Cataloging
If one wants to sell something, one needs to have good quality photos of the products he or she is selling. Not many people would buy a product without seeing it in the picture first. So conventional e-commerce businesses mostly hire professional product photographers that they would make high-quality pictures of the products. It can cost a lot to hire a good and reliable photographer for your business.
Drop shipping also solves this problem most of the times as wholesalers already have professionally taken photos of their items and such apps like Oberlo in Shopify allows to import images from sites such as AliExpress to your store without a huge effort. You save money as well as the time which could be used to scale your business.
No Required Storage
If you want to make a decent amount of money from the business, you might need a pretty large storage to keep your products and to store more than 1 000 items can break the bank for some. So as I have mentioned above several times, the standard online retail business model can require a lot of money because of the warehouse costs and it is not that efficient. Keep in mind that warehouses are also running out of space.
The e-commerce business model of dropshipping solves that problem as it does not require any storage unit to keep your stock. Every product is kept in the supplier’s warehouse and shipped only then when they are bought by someone from your shop.
Conclusion
As you can see drop shipping gets rid of many problems that conventional retailers might face and it has a lot of benefits over it. However, the conventional retailers will not disappear anywhere because in some cases they are more comfortable to use mostly due to the faster shipping rates but the number of dropshippers is still expected to grow as it is a more accessible business model for most people.
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