Inventory vs Drop Shipping: What Should You Go For?

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The traditional way of owning a store is by stocking a variety of products to sell to your customers. Due to advancements in technology, new ideas and ways of conducting business have been developed. Online business is among the new techniques for doing business. It is an easier way of reaching many customers. Owning an online store does not require stocking, hence dropshipping is usually the preferred method.

In this article, we expound more on inventory and drop shipping.

 

Inventory/Stocking

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Inventory is the process of keeping records of products and other materials stocked in a business store. The records aid in accounting for all products ordered and sold, and those still in the store. Business owners need to have inventory management skills to make sure that the stock is enough and does not run out during sales.

Inventory is applied in traditional businesses and some online stores. For instance, if Shopify stores do stocking, they can control the inventory and better decide promotional activities. The advantages of stocking are:

  • Reduces the risk of shortages: sometimes the demand for some products may increase leading to shortage risk. This is prevented if the company has been keeping records since they will know which products to order.
  • Customer satisfaction: having enough products in-store is vital to satisfy your clients. Customers appreciate good services and when they come into your store and access whatever they need, this builds your reputation among them.
  • Lowers prices: during ordering, the owner will need a huge number of specific items. Buying many goods at the same time lowers the cost since the supplier will probably offer wholesale prices.
  • Improves the business: inventory facilitates the correct ordering of items. As a business owner, you do not need to stock products that do not sell, instead, order more items that are favored by customers to increase your return on investment.

Although inventory has several benefits, it comes with its challenges.

  • Storage expenses: the more items you have, the more space you require. Storage facilities charge for keeping goods for you. The cost of storing products has an impact on the overall profits.
  • Overstocking: overstocking on products may lead to a massive loss. Sometimes, trending items become outdated very fast without any warning. Business owners who stocked them are left in a situation where they have a lot of products with no buyer.
  • Capital tied up: when placing orders, entrepreneurs use their capital to facilitate stocking. It is usually a risk that needs to be taken for the business to operate. However, having too many items in-store means that the owner has no cash in hand limiting any other decisions that need to be made regarding the business progress.

 

Drop Shipping

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Dropshipping is a way of conducting business for online stores without ever stocking on products. The entrepreneurs simply purchase products from different suppliers whenever a customer orders. The product is delivered directly to the buyer without the seller necessarily interacting with the product. Dropshipping does not need to take up funds, and Shopify store owners can test products flexibly and find their best sellers.

Dropshipping benefits online store owners through:

  • Versatility: dropshipping is very flexible in terms of location as long as you have a good connection. Online store owners only need to have a proper internet connection with both the suppliers and the customers. The availability of a strong network facilitates communication eliminating the need to be at a store physically.
  • Wide variety of products: since the business does not have inventory, the choice of products to sell increases and sellers can display different options for their clients. This feature allows sellers to be updated on the trending products and add them to their list of products with no further cost. Sellers only need to confirm if their supplies have stocked various new products.
  • Low capital needed: in the dropshipping model, a start-up business does not require a huge amount of money to start operations. Simply create your website and social media presence, get in touch with your preferred supplier and start selling. Once a customer orders a particular product and they pay, you can use that payment to purchase their ordered item.
  • Permits testing of new products without any liabilities. Since no inventory is needed, sellers can explore the new product in the market by simply showcasing it to their customers and assessing their reactions. If the product does not receive as many reviews as hoped, then the seller removes it from the list.

Despite the many benefits of dropshipping, there are some setbacks to this model.

  • Profits are low: although the investment and liabilities are greatly reduced in this model, so are the profits. To make a significant amount of returns, a store owner has to sell a lot of products.
  • As an online entrepreneur using the dropshipping technique, you have no controlover the supply chain because you do not handle the products yourself. This predisposes you to lose customers in case the product and the delivery services were not up to standard. The communication between your supplier, customer, and you might not be as effective as you have to go back and forth to communicate with each of them.
  • It is very competitive: the dropshipping business is quite easy to start hence there are no barriers for anyone to launch their site. For this reason, the industry tends to flood with sellers creating an impact on the prices and profits.

 

The Best Model For Small and Start-up Businesses

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Starting a business and maintaining it is not a walk in the park: business owners need to think ahead and adapt to methods that will somehow make things better. Although the capital required for small start-ups  is low compared to big enterprises, the business can still achieve great success. As an online business owner, it is beneficial to use dropshipping as opposed to the traditional method to make money online.

Dropshipping is a useful tool for online businesses and start-ups, this is the surest way to make your mark in the market with the lowest risks possible. Shopify store owners have been utilizing this model for some years now, making it develop even more. If you want to reduce the stress of inventories and storage spaces, then the best way to go is to adjust to the dropshipping model.

 

Conclusion

Using dropshipping as your business method is important especially for start-ups and small enterprises. For this process to go smoothly, you need trustworthy suppliers who will provide high-quality services to your clients. The Hitter App is here to fill this gap. The app simply recommends the best suppliers and facilitates the delivery to the right customer on time. With this app, nothing can ever go wrong. Sign up now to get these services at your convenience.

 

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