Running a business is something that isn’t always reliable. Effective and profitable business practices change and fluctuate consistently, especially in a time of such economical unrest at the moment. Attempting to find ways to save money is key to a successful business but eventually you can get stuck behind a wall. But have you heard of drop shipping? It’s a new technique that businesses are starting to rely on more and more frequently. Let’s talk about what drop shipping is and why it is becoming so viable.

What is drop shipping?

Drop shipping refers to a method of holding customer stock for your company. Currently the most popular way to hold stock is to bulk buy in advance to make sure you don’t run out going forward. Whilst this has been a somewhat effective tactic so far, it isn’t always completely cost effective.

There is often a chance that you over buy stock which then ends up getting left behind. Drop shipping solves this problem. They way it works is you sell products to consumers and then buy the right amount of stock and material needed for said products before shipping it right off. There are a lot of benefits to drop shipping, but they all come back to saving you money, which every successful business wants.

How does drop shipping help you save money?

The first major way that drop shipping will help you save money is on buying the stock itself. Using drop shipping will make sure that you don’t over buy on stock and end up loosing money if you have a bad month for sales. You will always have the right amount of stock all the time.

The second major way that you will save money using drop shipping is on storage space. If you are a smaller business, rent out storage space for you stock can do a considerable amount of damage to your profits. With drop shipping you don’t need to hold any stock because it goes straight from the production line to the customers. Effectively you will just act as a storefront, a middleman between the product provider and the consumer. A considerably more profitable work model that requires less work on your part.

What are some of the other pros of drop shipping?

Being a company that doesn’t require on holding physical inventory means that you can be incredibly flexible with where you run your business out of. You can very feasibly run either an at home online business or you can open up a high street storefront without much extra work changing over. You could very easily do both if you feel like there is the market for it.

Not having inventory to manage is also an incredible benefit. Yes, it saves money but more important it saves on time. You won’t have to spend an hour at the end of the day checking your inventory or even works having to hire someone to take on that workload. You can use that extra time to do the things you enjoy doing outside of work hours.

Not holding the inventory, yourself means that you will be able to provide a much wider range of products for your customers. You’re not stuck with just what you have in the inventory, your customers can order anything from any of the wholesalers and manufacturers that you buy from. Don’t go too wide the number of products that you sell though, it can be quite overwhelming for customers if you sell everything from health products to video games consoles.

Are there any issues with drop shipping?

The only major issue with drop shipping is getting stock and a consistent and reliable rate. It’s going to be a little harder to find a place that accommodates for a consistently changing set of orders each month that also is accommodating to the speedy delivery that would be needed. It wouldn’t be impossible, however.

There are some drop shipping specific companies. A good example would be Sourcingbro, they are a sourcing agent in China that provides a more personal service for your product sourcing needs. Companies like this are going to be key for you to overcome early hurdles in using drop shipping.

Another slight issue with drop shipping is that there are more costs. Sure, you will be saving a lot of money in terms of inventory management, but some of that saved money will go towards shipping costs and the fact the supply chain is bigger than if you were handling the stock yourself.

It’s also important to make sure you are on top of all the admin. Drop shipping isn’t easy all the time. Admin can get quite overwhelming if you’re not careful. You are going to be dealing with way more supplier and manufactures than your average store front and you are likely going to be dealing with them more often.

In conclusion, there are issues with drop shipping. The extra admin work that comes with it will definitely be a nightmare to deal with at first, but if you keep on top of it, the extra saved money and other benefits will quickly outweigh the initial issues that you will run in to. In no time you’ll be a complete drop shipping convert in absolutely no time whatsoever.