Drop Shipping: Opening New Avenues for Online Businesses

With the boom in online shopping and companies that maintain a presence solely on the internet, different avenues and ways to start your very own business have taken shape. Today we talk about one of these methods: drop shipping.

Drop shipping is a type of order fulfillment method where the retailer does not store or stock the products. Instead, the supplier, usually wholesaler, ships the product on behalf of the retailer.

Simply put, drop shipping frees you from the hassle of inventory management and the difference between the wholesale price and the retail price is your profit.

Drop shipping has been in the limelight for quite some time, with platforms for anyone to start his own online business. The most famous ones being Doba (www.doba.com) and Salehoo (www.salehoo.com). These are drop ship aggregators who provide a large number of trusted suppliers. Aggregators provide the platform for literally anyone without any retail expertise to get started.

Pros:

• Low startup cost. You don’t have any inventory, so you don’t have any inventory costs. These are usually the major costs in starting a business. You pay the supplier after receiving payment from the customer, so your business runs on zero credit.

• Don’t worry about inventory management. The supplier manages all the supplies and if you’re using an aggregator, all inventory is updated in real time.

• Make best use of your time. As you don’t have to manage inventory, shipping and other processes, you get the time for marketing the product and making your presence felt in the online space, which is very important for online businesses.

Cons:

• Low margins. Low profit margin is the main downside of drop shipping businesses. Low margins also means you have to sell a significant volume to make a decent profit.

• Backordering problems:  Inventory syncing can be a big issue as you’re relying on someone else’s inventory. The occasion may arise where you place a shipment request to the wholesaler, but the product is sold out. The effect of this is delayed delivery times or order cancellation.

• No control over shipment: Since you don’t own the inventory, you usually can’t control packaging and can’t include coupons or offers to boost returns.

Drop shipping in Pakistan:

The major hindrance in doing this business in Pakistan is that websites which provide the platform for drop shipping do not ship to Pakistan. It’s usually limited to the US. But there’s a way out for it.

Welcome to mail forwarding. Mail forwarding companies have their warehouses in the US and ship the products to any country in the world. Some big mail forwarders are Shipito (www.shipito.com) and MyUS (www.myus.com). Using mail forwarding, shipment costs from the US can be significantly reduced.

With online shopping increasing exponentially in Pakistan, drop shipping provides a low cost solution to entrepreneurs looking to fill the gap in the online business industry.