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The Risks and Rewards of Dropshipping

by Cin7 Team
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Retailers can make sales without the cost of carrying inventory when they dropship from suppliers and manufacturers to their customers. Dropshipping really requires three things: a supplier, a channel and a system to manage orders.

Dropshipping allows retailers to sell products that they never have to touch. When you dropship, you become your customer’s agent, in a manner of speaking. You make the sale, place the order, and arrange for a distributor or manufacturer to ship the product directly to the customer. Here are a few of the benefits, risks and basics of the dropshipping model.

Low-Cost Customer Engagement

When you dropship, the product you buy never enters your inventory. Dropshipping’s meaning and significance is that you don’t have to out lay cash in advance of a sale or cover inventory holding costs. In fact, dropshipping lets you complement your inventory with one-off or niche products that your customers are looking for. You simultaneously increase revenue while fulfilling customer desire.

Reputation by Association

When you dropship, you link your name with a third-party supplier. That means if the supplier runs out of stock or messes up a delivery, it’s your reputation that can suffer. On top of that, from a revenue standpoint, dropshipping means you won’t be generating the kind of margin you can achieve by selling products you bought at wholesale. For retailers, dropshipping is a real balancing act and a bit of a risk for a bit less of the reward.

Finding the Right Suppliers

To reduce that risk, it’s really important to work with a business that you trust. Your suppliers and vendors may already be geared up for dropshipping, which means they should have established proven ways to ship and track orders and handle returns. You can find suppliers using online dropship directories or even google searches. Either way, it’s important that they can demonstrate a workable and trustworthy fulfillment process. Who are the best dropshipping vendors? Your mileage may vary, depending on the nature of your business, but some of the most popular ones out there include Salehoo, Doba, Oberlo and Alibaba. Before you commit to a dropship vendor agreement, be sure you understand your provider’s minimum order requirements and wholesale unit prices.

Dropshipping with Cin7

Cin7 is a flexible inventory management software platform that lets brands track sales and stock regardless of how they sell. With Cin7, retailers can generate purchase orders and sales orders for their dropshipping business. See for yourself how Cin7 can help you incorporate dropshipping.