Dropshipping is a method by which you, as a retailer, sell products to the public without actually holding on to any stock or product. When you sell a product, you send the order directly to your chosen supplier; they ship the product, process the payment, and then send you the difference between the charge they make for the product and the price you charge. You never see the product, you never handle it and you don’t need to handle or process any payments. While you don’t need to handle the payments, there are some suppliers that will allow you to process your own payments and even some that will allow you to contact your own shipping company. Utilizing these choices, however, defeats the purpose of choosing to run your business using dropshipping.
There are many differences between a normal e-commerce business and a business using the dropshipping model. Some of those differences include the operating margins, operational logistics, operational costs, profit velocity, and barriers to entry. Below we are going to cover each of the differences individually. here are some Dropshiping live Example:- Sarkari Yojana
Operating Margins: The operating margin is the ratio that is used to measure a company’s pricing strategy and operating efficiency. It is the measurement of the proportion of the company’s revenue that is left over after paying for variable costs of production. The operating margin for a company that uses dropshipping is always going to be lower than that of a typical eCommerce company because you don't have the burden of carrying inventory or shipping product.
Operational Logistics: If you are running a business using drop shipping, you don’t need to carry any inventory or ship any products, which gives you the freedom to run your store from virtually anywhere in the world. When you are running a typical eCommerce store, you need to consider the logistics of running a warehouse and replenishing your stock, as well as coordinating shipping.
Operational Costs: If you are running a traditional e-commerce business you must consider the cost of paying for your warehouse, paying for the staff to run your warehouse, paying for the stock, shipping, and handling customer service. In comparison, the cost of running a business using the dropshipping method is limited to just customer service to take orders and send them on to the wholesaler or manufacturer.
Profit Velocity: While the hands-off nature of dropshipping is incredibly attractive from an operational standpoint, carrying inventory is a much faster way to ramp up profitability. This is because the profit margins are much higher when you have the option of purchasing products in bulk from an overseas supplier and selling them at a higher cost.
Barriers to Entry: Barriers to entry include the existence of high start-up costs and the other obstacles that prevent a new competitor from entering an industry. A company that is using dropshipping is a lot easier to copy and start up than a company that carries and ships its own stock.
