Every financially successful online entrepreneur understands their eCommerce accounting basics – we cover 10 of…
Dropshipping: Advantages for Your eCommerce Business
The term “dropshipping” is tossed around a lot, yet it’s often misused. Knowing that, we’re diving into the benefits of dropshipping, as well as giving eCommerce merchants some important facts to keep in mind for business decisions.
The Benefits of Dropshipping
If you want to read about how to run a business from your phone while drinking a tropical drink on a deserted beach, you don’t have to look very far. It’s not very unusual for people to leave their jobs at a fancy company and start their own successful dropshipping e-commerce businesses. They become their own bosses.
When you read about the benefits of successful dropship strategies, these are the main things that people say. They’re also true.
- You don’t have to pay for the product before it’s sold, so you have more cash flow.
- Scalability: You can try new products for your store quickly without the investment commitment and storage space
- Keep customers coming back for more: With the ability to add new and expanded product selections on a regular basis, you can keep your customers coming back to see what new items you’ve added. Costco stores are a good example of this, and with a dropship program, you can offer the same thing online.
- Low start-up costs: You don’t have to buy wholesale or pay for the cost of making your own products. You can start selling without having to spend a lot of money right away.
- Growth into new markets: Getting products across international borders can be costly and difficult, but if you work with suppliers who are in the right place, you can often get the same or similar products and ship them quickly. This lets you test the market and see if a certain product is worth importing before you buy it.
- Cut supply chain costs: This includes ocean freight services, port operations, LTL and FTL services, and warehouse workers. The Cost of Goods Sold includes all of these costs as well. Your margins will be higher if the products are dropshipped
- Virtually unlimited inventory: One of the main reasons the dropship industry exists is to help retailers and suppliers fight inventory distortion: the 800-billion-dollar problem of over-stock clearances and out-of-stock shelves. The dropship industry helps both retailers and suppliers do this. In theory, you could get almost unlimited inventory by getting your hands on inventory further down the supply chain.
Shopify provides great support around dropshipping – be it apps available for your e-commerce store, management tools, or tips & tricks.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.