Logistics, proprietary warehouse or dropshipping?
One of the longest-running dilemmas in the history of online commerce is whether to sell in dropshipping or stockpile. The reason why this question has never been completely settled over the years is simply because it is, in reality, complex. The right answer exists and is relative, i.e. it changes not only according to the e-commerce, but also according to the needs of the same e-commerce in different stages of its life.
When you have a startup that explains the sails to success, launching into the market of reference, you obviously want everything to work perfectly and make sure that every piece is in place. Risk is an integral part of entrepreneurship, but if you play your cards right, you can significantly lower this risk and increase your chances of success. Making the right choice between stocking or dropshipping is the first big bet that, if you win, can really pay off.
What is dropshipping?
Drop-shipping allows you to have an e-commerce but you don't have to actually own the products you offer for sale to your public. When you decide to start an e-commerce project, you will have to make an important decision, that is, to figure out whether to rely on your own warehouse or to rely on an already existing warehouse. If you decide to opt for your own warehouse, of course you will have to manage all the logistical aspects related to this solution on your own. However, if you decide to stock up with another company which provides its warehouse for your online store, you won't have to deal with these aspects. Of course, there are certain software and modules to integrate into your e-commerce, such as This allows you to automate the sending of notices regarding orders to be delivered to suppliers and corresponding couriers.
Advantages and disadvantages of each choice
Each choice has its pros and cons, of course, which vary according to the general needs of your company and, in particular, depending on the situation at the time and in the conditions of your business.
Warehouse pros and cons
Among the advantages of having your own warehouse, of course, there is that of having total control over how the goods are managed:
- you have more freedom on the final price of products
- you can monitor your supply status
- you can easily manage returns
- you can have exclusivity on a product or a series of products
Of course, having a warehouse also has its disadvantages. However, these are not all bad and may vary from case to case. Among the most common, these include:
- physical warehouse management costs
- the time needed to manage the various logistical aspects of a warehouse
- The risk of accumulating unsold material (particularly inconvenient if these are perishable items)
Dropshipping pros and cons
One of the most frequently chosen solutions is dropshipping, especially by companies in the startup phase.The particular advantages of this method enables you to:
- manage your e-commerce even without a real physical location
- depending on the agreements, have potentially infinite sales possibilities
- reduce the capital to almost zero by investing in your project at an early stage
- avoid risks of redundancy or the accumulation of unsold material
Now that we've seen the advantages, let's look at the down sides of the dropshipping method. Some of the reasons that you might not want to opt for this choice could be:
- the profit margin is not too substantial, but it is still a matter of percentages
- lack of control in terms of supply, which could lead to a number of problems
- selling products that belong to or are produced by other companies
How to choose
One of the smartest ways to figure out when and if it is time to opt for one solution rather than the other is to figure out if the pros outweigh the cons with regard to your particular situation. So, business plan in hand, try to work out how to eradicate or even reduce the cons for each choice. This is the only way to optimize your investment, which requires as much energy as money and time, and start your e-commerce towards success.