Read Time: 4 mins Drop shipping is an extravagant and slightly risky business whose profitability heavily relies on your product type. If your product is niche and in high demand, you will be flourishing. If not, the loss won’t be as much since you don’t have a ready inventory.
Coming to India, Drop shipping has worked wonders for many drop shippers and over time the customer experience has also improved. Let us understand this better.
How Does Drop Shipping Work?
An inventory-less business model, drop shipping has 3 parties involved in its process: The seller, the end customer and the drop shipping company.
A seller sets up an online store which displays the products. A customer navigates on this ecommerce website and finds the product he is looking for.
Once the order is placed, the seller informs the drop shipping company. The dropshipping company then makes the product, packages it and delivers it to the end customer.
Under ideal circumstances, the work gets divided between the seller and the drop shipping company and good coordination between them gives the customer a good experience.
When it comes to India, drop shipping is definitely a profitable business because of many reasons. If it is not working out well, then you might find the reasons for the same listed below.
Reasons why Drop shipping works in India
Dropshipping is a hit concept and a profitable one in India because there is so much scope of growth and experimentation in the market here. Here are a few reasons why it works:
- Cost effective: For new businesses, drop shipping can help in saving the initial costs as well as later costs. It is a budget-friendly and easy-on-the-pockets business model, which can sail your business to new heights. For developing countries, this is a really good option.
- Lowered risk: The risk of loss isn’t as significant in drop shipping as other companies because there is no stock left. A product is made only when the demand arises. For Indian companies, this can be helpful in not attracting huge losses considering the shipping and tax costs are also a lot.
- Internet Penetration: In the last decade, internet penetration in India has scaled a very high margin which has made online selling a very big deal. People are using internet on their phones and the convenience has led to them to order things online rather than go buy them from brick-and-mortar stores.
- No Inventory hassle: There is no unnecessary headache about where to keep the inventory and then aggressively market to make sure all of it is sold. It eases the pressure of selling as you are not directly responsible for production. India has a higher cost of goods and taxation, so dropshipping offers the solution where it’s possible to only produce as much as you can sell.
- Automated Functions: If you notice, dropshipping functions can easily become automated which makes it easier to concentrate on other business aspects such as branding, marketing and business development. Functions like- placing orders, tracking orders, setting prices, performance review, promotions, ads etc can all be automated and don’t require you to manage them on a regular basis.
- Purchasing Power: Another major development that has taken place in India is the increase in purchasing power due to more disposable income. People want to buy more and are aware of brands that are popular across the globe. For example- A few years back, did you imagine having a closet full of Manchester United merchandise? People are more specific and ready to spend now.
- Niche Products Availability: Like the example above, bringing niche products to India is attaining power in your own hands. Electronics, merchandise, clothes, books etc become more of value because it is what the people exactly want. For example- if you are selling T-shirts with popular culture quotes or you are giving signed celebrity posters, it can make your business fly.
- Supplier Language benefit: India is a great country for many reasons, one reason being that we are a land that speaks multiple languages. English, being one of our greatest strengths, helps us in interacting with many countries, thus, widening our market space. This leads to getting more options for delivery and purchase across and outside India.
- Location Independent: You are saving on rent cost because you don’t really need to have an office. The ‘Work from Home’ idea can be put to use if you are an online seller because all you need is a laptop and well, the right business sense.
Reasons Why Dropshipping Wouldn’t Work
Despite the many advantages, if your drop shipping based ecommerce business isn’t faring well, then the reasons could be:
- High cost of goods and taxes can increase overall costs tremendously leading them into a loss.
- Sometimes, the shipping time can be more than usual because of inadequate transportation or not enough funding for smaller distribution channels.
- Since it is a new concept, customers might be resistant to it and question the credibility of the company if it is being delivered by someone else.
- Refunds and Returns become a difficult task as the entire process has to reverse. It is time consuming and may attract a loss.
- The fundamental reason drop shipping is not working out may be the quality of the product. Like every business, even drop shipping has to give something of value to the customers.
- If the seller’s website looks cluttered and the behaviour is unprofessional, then it might affect customer experience vastly. Improper coordination between the seller and the drop shipping company is also a show of unprofessional behaviour.
You can deal with all these problems by finding the right drop shipper and figuring out a way of building a good coordination between you and your drop shipper. Plan a good budget keeping in mind the shipping and taxation costs so you can still make a good profit.
India is a growing market and starting a drop shipping business could work wonders for you. Just find the right niche, and the right drop shipping partner! Here is how you can start your dropshipping business.