Welcome to the 2nd part of drop shipping blog series. In the previous part I explained what exactly drop shipping business is and how people spread like a viral disease. Now in this part I’m going to explain the history, pros and cons of drop shipping business. If you didn’t read the previous part then you can find here.
According to wikipedia in April 1984, CompuServe launches the Electronic Mall in the USA and Canada. It is the first comprehensive electronic commerce service. In May 1989, Sequoia Data Corp. Introduced Compumarket, the first internet based system for e-commerce and that was the starting point of ecommerce system. After a few years the leading and biggest e-commerce platform Amazon was founded by Jeff Bezos on July 5, 1994. While Amazon was growing bit by bit a new ecommerce platform eBay was founded by Pierre Omidyar September 3, 1995, San Jose, California, United States. After 2 years of launching eBay introduced a new policy that eBay seller can sell item of others which is called dropshipping. People started selling items from amazon to ebay.
Drop shipping still was not going as viral as now. In April 4, 1999 AliBaba Group was founded by Jack Ma and his team in Hangzhou, China then the drop shipping started picking up the ecommerce industry. In 2004 Shopify was founded by Tobias Lütke and now guess what??? Boom!
Shopify was started for retailing business but when Alibaba group introduced Aliexpress.com in April 26, 2010 the whole industry became viral and now every marketer try to dominate on shopify-aliexpress dropshipping business.
The Pros of drop shipping business
- Can launch without having a lot of capital – To launch any startup, it needs to set up a lot of thing like purchasing inventories, dealing with shipping system, finding investors and overall taking high risk. In other hand you can lower the risk as well as you can operate hassle free business with drop shipping.
- No need to manage inventories – With dropshipping, you do not need to handle inventories at all. To manage the inventories is like having burden over your head. It takes warehouse to storing and managing your inventories which increases the risk of your business. So do business with dropshipping and forget the hadech.
- Full freedom- If you don’t have time and try to run a part time business then this business is for you. You will need only 4-5 hours in a day to run this business and rest of the time in a day you are absolutely free. But you will have to have a smartphone to get the notification of your sale and customer’s activity all the day. In other side you are absolutely hassle free from managing inventories, dealing with shipping system etc.
The Cons of drop shipping business
- Fraud suppliers- The biggest issue in drop shipping is finding trusted suppliers. No doubt in the internet world there is a same ratio of trusted and fraud activities. It will be your big challenge to find out your trusted supplier.
- Shipping Method issues- When you shortlist your trusted suppliers some of them may allow shipping world wide and some of them selected countries only. It will be also a big challenge for you to manage your sale with shipping method and shipping costs.
- Lower margins- In drop shipping you can’t offer too high price than its actual price. You have to keep in mind about shipping costs, marketing costs, store commission costs, payment gateways costs, fund transfer costs etc. so at the end you will get lower margins.