Drop Shipping Basics

Is drop shipping really right for you? This simple guide will help you figure it out.

Step 1: Evaluate the Pros & Cons of Drop Shipping

How can drop shipping benefit you?

Drop shipping is not a ‘get-rich-quick’ scheme. As with any business, success requires dedication and hard work. However, there are distinct benefits to using drop shipping in your online business:

  • You can become a retailer without needing to invent large amounts of money.
  • You can start a business and test the market with very little risk.
  • You don’t have to carry inventory or pay for inventory up front—if the product doesn’t sell, you never have to buy it from the supplier.
  • You don’t have to buy packaging materials and shipping labels, nor will you need a shipping account. The supplier handles all of this for you.
  • You purchase products at wholesale pricing and set your own retail prices.
  • You can focus more time and resources on revenue-producing activities like marketing, advertising and product research instead of inventory management, packing and shipping.

What are the drawbacks of drop shipping?

Many retailers get a lot of value from working with drop shipping suppliers, but it is by no means a perfect solution for everyone. Drop shipping comes with some drawbacks, including the following:

  • You lose some control over shipping times, packaging processes, and package branding.
  • Your supplier may run out of a hot-selling product.
  • Drop shipping fees (a handling fee set by the supplier for each order) may increase your expenses.
  • You can’t take advantage of discounts for buying in bulk up front. This is the trade-off for the supplier bearing the cost and risk of managing the inventory.

Will drop shipping save me time and money?

In Step 2, we’ve created a basic list of the time and cost factors to consider in evaluating the potential savings of using drop shipping versus a wholesale inventory model.

See the Potential Savings