Lifestyle

What is dropshipping, and why do people do it?


Has your online shopping peaked over lockdown? (Picture: Getty)

With non-essential retailers currently closed, people looking for retail therapy have had to turn to online shopping.

Websites and apps that encourage the creativity of individual sellers, like Depop, Etsy and eBay, have boomed over lockdown.

But if you’re wondering why your parcel has taken longer than expected – or you’re considering setting up your own business – you might have heard of dropshipping.

It’s not a new method of selling products, but online commerce has exacerbated the method: so what exactly is dropshipping?

What is dropshipping?

Dropshipping is a way of selling items that doesn’t require a shop to keep the items it sells in stock.

The seller acts as a middleman – purchasing an item from a third party after they’ve ‘sold’ it, and then shipping it directly to the customer.

The item itself is never handled by the seller. (Picture: Getty)

The item itself is never handled by the seller, although this may not be obvious to the person buying it.

The assumption, especially on sites that seemingly work with small businesses, is that a seller has a range of stock that they then pass on to the buyer for a profit.

With dropshipping, the seller merely communicates with a wholesaler, or even the manufacturer, to get the desired item to the customer.

Why do people dropship?

Depending on the product, it can make sense for smaller sellers especially to dropship, as the overhead costs are much lower.

Small businesses often find drop shipping has lower overhead costs. (Picture: Getty)

The appeal of an ecommerce store is often that it can be done from home – no bricks and mortar shop is required.

But storage is needed for inventory, and traditionally, retailers have had to tie up huge amounts of capital in purchasing it in the first place.

Especially during lockdown, dropshipping has made sense for a lot of first time sellers aware of a product in demand – but without the start-up costs.

It also allows sellers some flexibility in terms of their location, as products can be sourced from overseas. With many reporting delays in international shipping to the UK, and increased fees for business between the UK and Europe due to Brexit, this could potentially be less of a draw.

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However, dropshipping comes with risks, too. Sellers are likely to have low margins as they compete with bigger sellers – and that can make it difficult to grow the business.

Supplier errors, or shipping complexities, can also cause issues.

If a mistake is made by the wholesaler, the customer will expect the seller to fix the issue.

With a range of shipping issues to take into account, too, this can become complicated and expensive – products might arrive from different places, with the seller having to absorb the cost of sending the products.

While dropshipping is often seen as a money-saving solution by some small businesses, it often requires serious calculation to work out if the less-traditional option is better: so keep an eye out next time you’re on Depop or Etsy.


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