The advantages and disadvantages of dropshipping | F&B Report

OCTOBER 27, 2022

If you’re a budding entrepreneur who’s looking for a way to build a successful online business, you might want to check out dropshipping.

In dropshipping, you serve as the link between your customer and your supplier. It is simply an order fulfillment method in which items are purchased from a third party and shipped directly to the buyer. Compared to the standard retail model, sellers don’t stock or own inventory, which means they don’t have to directly handle the products.

First, you set up your online shop and post your products. Your customers can then place their orders. After that, you relay the orders to your suppliers and they will deliver the products to your customers’ address. Popular examples of dropship suppliers in the Philippines are Lazada, Shopee, and eBay.

Here are some advantages of dropshipping:

  • Easy to get started since there is less capital required. You only need to set up your shop and have a supplier
  • No need for a complicated logistics system that involves managing a warehouse, packing and shipping orders, handling returns and inbound shipments, and maintaining stock level
  • Prevents overstocking and other inventory costs
  • Flexible location (you only need to have internet) and a wide selection of products
  • Streamlining of cash flow and invoice

While these benefits exist, you also have to consider some of its disadvantages:

  • It’s a highly competitive landscape. Many stores will set up shops and sell items at cheaper prices
  • No control over the supply chain. You have to talk to customers directly when there are complaints about product quality, fulfilment speed or return policies
  • Inventory can change on a daily basis since you can be sourcing from multiple suppliers
  • It’s tricky to customize and build a brand since the supplier mostly controls the products.

Before you venture into dropshipping, always see to it that you know your market well. Have a trial period when you can test a product’s market potential. You also have to create an edge against your competitors and secure a reliable dropship supplier.

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