Dropshipping is a very good business nowadays, everything seems to be bought online and you might be thinking that dropshipping might suit you but there are many things to consider when setting up an e-commerce business, some include delivery arrangements, inventory and stock locations and finding the most cost effective and least time consuming way to organize products.

Although many businesses use dropshipping for the online shop websites, there are many disadvantages of dropshipping that you must consider so you are ready before things go south. Here's what you need to know about the risk of dropshipping.

Review Of Dropshipping

Dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfer the customer orders and shipment details to either the manufacturer, another retailer or a wholesaler, who then ships the goods directly to the customer. 

As in retail business, the majority of retailers make their profit on difference between the wholesale and retail price, but some retailers earn and agreed percentage of the sales in commission,  paid by the wholesale to the retailer. 

The Disadvantages of Dropshipping

Stock Shortage

Sometimes stock shortage are common problems in dropshipping. If customers suddenly rush for a particular product,  it may ran out of product quickly. The solution here is email your customer in advance and tell them that you refund their payment to their account. 

Increase In Cost of Goods Sold

Stocking retailers usually pay less than a drop shipping retailers who is selling exact same item. Stocking retailer usually get better pricing, marketing incentive, additional bonuses, inside information about the product line, access to deals, among many other advantages, this is because they have direct relation ship with the manufacturer who makes the product they sell. 

Higher Fullfilment Costs

Dropshipping process requires that you pay real cost of stocking, picking, packing, and shipping, as well as a large mark up, this means that dropshipping cost rise as your sales grow. However, if you stock merchandise yourself, you have more control over these cost. 

Increase Customer Service Issues

Although dropshipping saves your company time by not responsible of shipping a product to the customer,  it also takes a big part of the customer experience out of your control, unless you know when your product is boring shipped out, the tracking information,  and the arrival time, there's no way for you to guarantee that a product has arrived as described and on-tine. 

Additionally,  when a customer calls you to complain or ask questions about their shipments, the resolution process is much slower as you do not often have the necessary information on hand. 

You are Required To Find a Winning Product

Drop shipping is not an online store because you cannot compete the big stores and don't try to be one, even its possible because drop shipping is all about pushing a winning product to your customers and finding a winning product is whats important if you really want to be successful in drop shipping.