The first question an e-retailer must ask before going into the dropship business is how profitable it will be. Because it is difficult to locate reliable dropshippers, many retailers must carefully consider it before opting for one. There are positive and negative sides to dropshipping and the retailer must size up both sides before making a decision. The following are some of the advantages and disadvantages of working with dropshippers:

Advantages

• Dropshipping allows the retailer to avoid having to deliver the goods or needing space to stock them. It is, thus, a good business for retailers who prefer to make a small initial investment.

• The retailer cuts down on expenses as there is no need to employ people to interact with the traders. Rather, it is the dropshipper who deals with the wholesalers, handles the packaging and delivery of goods and so on.

• A big problem faced by retailers is the possibility of getting stuck with goods that are unsold or go out of fashion quickly. This can lead to the retailer running at a loss. As dropshippers are the ones who actually buy the goods and deliver it directly to the retailer’s customers, this is a hazard the retailer avoids.

Disadvantages

• Many dropshippers ask for a yearly service charge, over and above the amount the retailer pays for the goods, shipping and handling, and other expenses. This is an added expenditure that will cut into the retailer’s profits.

• Many dropship companies do not deliver goods to customers on time, since their foremost concern is to secure as many orders as they can and sell as much as possible. Having to deal with unsatisfied customers is one risk the retailer faces as it can affect business.

• Sometimes customers inadvertently buy goods that are not in stock. This is because some dropshipping companies do not update their catalogs on a regular basis. In the confusion, goods reach customers late. A disgruntled customer most likelywill not place an order through the same retailer again. This could affect a retailer’s positive review tally, especially those conducting their business on eBay.

• Dropshippers have a huge amount of clients, all of whom compete with each other to buy the same type of goods. This can mean heavy competition, which may further result in the retailer facing a slow-down on sales.

• Retailers cannot guarantee that their customers will receive goods of a high quality or that they will not be damaged. This is simply because all dropshippers may not have the workforce to ensure this, while others may not regard this as a priority.