The shipping and logistics industry has grown exponentially in the last 25 years. In 2019, the total annual value of world shipping trade was worth over US$14 trillion, according to the International Chamber of Shipping. Statista further reports that the container shipping market is expected to grow at a yearly compound rate of 12% for the next decade, hitting a whopping US$15.87 billion by 2028.
The profitability of the shipping and logistics industry naturally creates a by-product of the emerging trend, dropshipping. Business owners are no strangers to the concept of dropshipping since it took off in 2015. Grand View Research reported that the dropshipping industry was worth US$102.2 billion back in 2018 and is predicted to grow 28.8% by 2025. This growth comes in tandem with the need for faster shipping solutions for dropshipping.
To Recap, What Is Dropshipping And How Does It Work?
Dropshipping is a retail business without the need for an inventory. Instead, the business purchases the products from a third party once a customer makes an order. This party then delivers it directly to the customer. Dropshippers buy an inventory of goods from a wholesaler or manufacturer as and when required and fulfil the customer's order without directly handling the products. This way, they can focus on the marketing and management of their e-commerce business, leaving inventory management to the supplier. They typically charge a higher price for the product than what they pay the supplier or manufacturer. The difference in these costs generates the profit for the dropshipping business.
Pros And Cons Of Dropshipping
Dropshipping business is gaining popularity these days since it offers many pros over its cons, particularly for being straightforward and intuitive than its traditional retail counterpart.
The most significant advantage of this model is that you don't have to invest a lot of money in inventory to start an e-commerce business. These overhead costs are avoided when you do not store inventory and manage the shipments of stock. Since it’s incredibly streamlined, you can even start a dropshipping business from home – all you need is an e-commerce store, which you can easily create online with platforms like Shopify, and connections with partner vendors to supply your customers with the goods.
Of course, you’d be competing with these vendors who are also selling the same products online but what makes dropshipping incredible is that you can target a niche market these vendors can’t or have not reached. This makes it a viable business opportunity.
Moreover, you can diversify your products based on user preferences and trends because you do not have to pre-purchase the items you want to sell. This means you can focus on multiple product verticals and spread out your competitive risks, if any. Taking on larger orders won’t take a toll on your team either – by redirecting these orders to your vendors, you leave the responsibility of picking and packing to them. Therefore, even during peak seasons, you can focus on marketing and increasing your customer base, driving more conversions for your vendors to fulfil.
