The dropshipping model has rapidly emerged as a popular choice for many entrepreneurs, especially those tapping into e-commerce for the first time. Unlike traditional retail practices where businesses stock up on inventory in anticipation of customer demands, the dropshipping method operates on a 'buy-as-you-sell' philosophy. When customers place orders on dropshipping websites, the business doesn't fetch the item from a backroom or warehouse.
Instead, they procure the product from a third-party supplier, such as manufacturers, wholesalers, or other retailers. Once the order is confirmed, it is the supplier’s responsibility to pack and ship the product directly to the end customer. That is essentially what dropshipping is about.
The model's simplicity, requiring no inventory storage, combined with the vast potential of a global market, makes it an alluring prospect. In fact, according to Grand View Research, the worldwide dropshipping market is projected to experience a Compound Annual Growth Rate (CAGR) of 23.4% from 2023 through 2030. But as with all ventures, dropshipping presents both pros and cons.
Let’s dive deeper into the advantages and disadvantages of starting a dropshipping business.
Advantages of dropshipping
For starters, dropshipping offers a streamlined approach to e-commerce, presenting entrepreneurs with a host of benefits including:
Dramatic overhead reduction
One of the primary appeals of running an online dropshipping business is the significant reduction in overhead costs. There's no need to rent out storage space or manage a warehouse. This translates into fewer initial investments and reduced operational costs. Money that would otherwise be tied up in inventory can now be utilised elsewhere, such as marketing or website enhancements.
Diverse product offerings
Since businesses don’t need to pre-purchase the items they sell, they can offer a broader range of dropshipping products. They can quickly test new products on their platform without worrying about unsold inventory. This adaptability allows businesses to keep up with ever-evolving market trends and consumer preferences.
Elimination of unsold inventory risks
Traditional retail models often grapple with the dilemma of unsold stock, which can lead to wasted resources and potential financial losses. With dropshipping, the risk of ending up with unsold stock is virtually eliminated, as products are only ordered based on actual customer demand.
Disadvantages of dropshipping
While dropshipping promises several advantages, businesses that aren't well-equipped might face obstacles they hadn't anticipated. Highlighted below are some of these challenges:
Reduced profit margins
While dropshipping reduces overhead, it may result in thinner profit margins. Businesses are often at the mercy of third-party suppliers' pricing strategies, making it a challenge to compete with larger retailers who buy in bulk and enjoy greater discounts.
Dependency and unpredictability
Reliance on third-party suppliers introduces a degree of unpredictability into the business model. Suppose a supplier runs out of stock or faces shipping delays. In that case, it can directly impact the dropshipping business’ reputation and customer satisfaction, even if they had no direct control over the situation.
Complex customer service dynamics
Dropshipping businesses often find themselves in a tight spot when customers have complaints or issues with the delivered product. Since they don’t handle or see the product directly, resolving such concerns can be challenging.
The importance of a reliable delivery service provider in Myanmar becomes evident here. Teaming up with dependable partners ensures fewer mishaps, timely deliveries, and a smoother resolution process, enhancing the overall customer experience. Without this, businesses may face amplified customer dissatisfaction and potentially damage their brand's reputation.
Dropshipping in Myanmar: Emerging opportunities
Now that you are more familiar with the meaning of dropshipping and what it entails, the question naturally arises: Can you do dropshipping in Myanmar? Absolutely. According to ecommerceDB, Myanmar is swiftly establishing itself as a promising hub for e-commerce, ranking as the 55th largest global market. By 2023, it is anticipated that the nation will generate a revenue of USD$3,042.3 million from e-commerce, outpacing countries like Kenya. Projections also indicate a robust CAGR of 13.2% from 2023 to 2027, catapulting the market volume to US$4,988.2 million by 2027.
Diving deeper into the Burmese e-commerce market reveals diverse opportunities across sectors. Food and personal care is the most popular sector, contributing 35.9% of the country's e-commerce revenue. Other segments, including electronics and media, furniture and appliances, as well as fashion also present lucrative opportunities. Such diverse avenues offer a plethora of options for aspiring dropshippers.
Shipping companies like DHL Express are extending their services to dropshippers, making both domestic and international dropshipping feasible. The trajectory points upwards if you are keen on starting a dropshipping business in Myanmar.
