The dropshipping process can be automated by using a dropshipping hub. This serves to streamline the process, as well as make it efficient, quick, and convenient for both the dropship merchant and the consumers.
We have recently reviewed 3 such hubs, Source of Goods, Inventory Source, and Wholesale2B. And while these are all great services, there are still pros and cons to using a dropshipping hub.
On the plus side, a hub allows for scalability. This is because most manual dropshipping processes can be automated, including searching and liaising with suppliers, as well as order processing and back-ordering.
Furthermore, a good dropship automation system allows the virtual retailer, or dropship merchant, to focus on two activities; customer service and marketing.
Automated dropshipping when working as it should, makes the trading processes of dropshipping fast, efficient, and seamless. The key issue there is “working as it should”.
For those looking to start a dropshipping business, and will be using a hub service to do so, here are a few of the advantages and disadvantages you will likely encounter.
Advantages of Using a Dropshipping Hub
It saves time and money. The alternative of dropship automation is to hire people to do some of the dropshipping processes like order processing and forwarding to suppliers, as well as liaising with the supplier for order fulfillment.
For an existing brick-and-mortar store with a physical address and existing stock, the dropshipping hub allows it to use the dropship order fulfillment model to expand the range of products it can sell, as well as increase the volume of sales it can make.
Usually, this physical retailer can add the items to be drop-shipped in the product catalog or online product page, while in the store, each one of these items can be placed in the display.
This form of dropshipping is also convenient for a small physical retailer that receives a large order as it can use this method of order fulfillment through a dropship hub.
Likewise, if the physical retailer wants to trade inexpensive products, dropshipping offers a less risky business stratagem as the retailer does not use his/her capital to acquire the product, and only acquires the product when a sale order has been placed.
One of the leading dropship hubs in the market today is Source of Goods, which allows its dropship merchants to pay for a product once a sales order has been made.
For Source of Goods, the merits conferred by dropship automation are that it streamlines its order processing, shipping, and maintenance of merchant and vendor databases.
For the dropshipping retail business that is using Source of Goods as its dropship hub, dropship automation makes the business easy to start, manage, and grow; and it does not demand much startup capital and has minimal overhead costs, besides providing a flexible business model.
A good dropship hub must allow its merchants to use multiple trading platforms to sell their wares. This includes both the webstore, an online marketplace, and an online auction store such as eBay.
Disadvantages of using a Dropshipping Hub
The most obvious disadvantage of using a dropshipping hub, and dropshipping in general, is a delay in order fulfillment, as the placed order needs to be back-ordered – by the retailer – from a fulfillment entity that then ships the product(s)/order.
The consumer is usually not informed about the real cause of the delays, and because the retailer has no control over the shipping plans of the fulfillment entity, the retailer can underestimate the shipping period, hence causing the customer to wait for a relatively long time for his/her order to arrive.
This can negatively impact the level of customer satisfaction about the transaction. For this reason, the retailer is required to estimate the shipping period based on the information given by the fulfillment entity, and then add a few days to cover for unforeseen delays.
Moreover, in case the fulfillment entity alerts the retailer about a possible (or sudden) delay, then the retailer needs to pass this information to the consumer.
Another disadvantage to look out for is slim profit margins, which grows even slimmer if one chooses to engage in dropshipping of products belonging to a super-competitive niche where customers already know the maximum recommended retail price.
Fortunately, in business niches with low competition, the profit margins can be good.
Another demerit of dropshipping is that the merchant lacks control over product quality, inventory management, and packaging and shipping of products.
This requires the retailer to have a damage control system in place in case of customer complaints. These complaints usually occur when the order is not fulfilled, or the customer receives a faulty product or a product model that (s)he did not request for.
An axiom to remember about dropshipping is that the customer always blames the retailer for fulfillment delays, non-fulfillment of orders, and acquisition of a product not advertised.
It is for this reason that one is advised to use a dropshipping hub well so as to minimize the chances of customer complaints and non-satisfaction.