If you’ve been scouring the parts of the Internet that teach how to make money, then you might have come across the term Drop shipping. Drop shipping has gained popularity in the recent times.
So what is Drop Shipping in simple terms?
Drop shipping is the future of Ecommerce.
To understand drop shipping, you need to understand the normal retail Ecommerce process. The manufacturer ships the goods to the retailer’s warehouse, then the retailer distributes these goods to his own stores where he makes the sale to the customer.
In Drop shipping, the product is manufactured and directly delivered to the customer. The retailer just controls the website and the marketing and doesn’t get a hold of the product. So if you are a retailer, you can literally work from anywhere.
To give you an example, say you are a drop shipper and you deal with watches. Your company makes men’s watches, which caters to the business casual market. You have an e-commerce website and a Facebook page and other social media. The watches get manufactured in China and they give the products to the fulfiller who is Amazon. Amazon delivers these goods all over the world for a commission per sale.
So why is drop shipping beneficial?
With drop shipping, there are a lot of things you do not have to worry about at all. In an e-commerce business, if the physical product is taken out of the picture then a lot of your worries are out. There is no warehouse that you need to rent or purchase. Packing is taken care by the manufacturer and even Inventory management is handled.
You can start with few pieces of your product initially and you can keep increasing it.
There are no fixed costs you’ll have to worry about. You don’t necessarily need an office. Even if you have to employ a customer support person, then that person can work out of their homes.
3. Location is not a problem
One can run this business out of nowhere and it’s not location specific. You can run out of your parent’s basement or even work while travelling the world. This flexibility is what attracts a lot of digital nomads to enter the drop shipping business. So you can literally be sitting in your house in Singapore and run your ecommerce store from there which ships to all over the world.
A drop shipping ecommerce business can be easily scaled compared to a traditional store. You can add products with just a click of a button. You can go from 1 product to 10 products in a day’s time. The cost of warehousing doesn’t increase for you, but the opportunity to cross sell are very high.
The Singapore Ecommerce scene has also been taken over by drop shipping with many ecommerce stores using this model. Zalora is a popular e-commerce fashion label that is present in many countries including Singapore.
Lazada is a fulfillment company that is popular in all of South East Asia. They are the Amazon competitors in this region. They also have an e-commerce store front as well as last mile delivery options. If you are in a part of the world where you don’t have access to the south east Asian market, then all you have to do is tie up with Lazada and sell on their stores. People purchase from their stores and Lazada takes care of the shipping and your business has a presence among 500 Million customers in over 8 countries. This is the power of drop shipping. You don’t have to go to a specific country and set up a retail store and so on. Your business is through the internet.
Hipvan is another Singapore ecommerce store that uses drop shipping to get their products to people from different parts of the world.
Disadvantages of Drop Shipping
If we cover the benefits, it’s only fair to cover the disadvantages as well.
Drop shipping has low margins because of ease of getting in, there is a lot of competition and because of that a lot of discounting happens to gain users. As a logn term strategy this doesn’t work because when it comes to ecommerce there is no loyalty from the customers.
There is no direct control of the products in hand and this can cause problems in terms of Inventory and also the quality of the products. There is no internal control that you put in place for your manufacturer as they are situated elsewhere. So bad packaging or broken goods may be because of the manufacturer’s fault, but you will have to bear the costs and your customer service team will have to handle the requests. So getting the right fit of a quality and affordable supplier is hard.
Singapore Ecommerce entrepreneurs have a lot of opportunities in scaling their businesses worldwide and drop shipping will give a huge boost to the Singapore ecosystem.