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Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.

The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party – usually a wholesaler or manufacturer – to fulfill orders.

To determine whether a wholesale provider is right for you, it pays to look at the following factors:

• Product Offerings – It may be obvious, but it’s important to ask if the wholesale provider offers the product and brands you want. Try to work with wholesalers that offer a clear product catalog that’s easy to search and comes with plenty of product details to make the buying process as simple as possible. Also examine whether the wholesaler offers products that you don’t currently have but want to offer at a later date, whether they have exclusive access to certain key products, and how consistently available their products are available so that you never run out of inventory.
• Reliable Shipping – Even if you buy products cheaply from a wholesaler, if they’re delivered late it could mean big losses for you. Essentially, an unreliable wholesaler will reflect poorly on you, meaning your ability to deliver excellent customer service to your own customers will take a hit. That’s why it’s useful to choose a wholesaler with automated shipping alerts, product tracking and a knowledge of your industry’s shipping needs. For example, when choosing a food wholesaler, make sure they’re using quality refrigerated trucks to keep your produce fresh.
• Price – Price isn’t always just determined by volume. Be sure to look into a wide variety of wholesalers, as there can be substantial price differences based on shipping distances, the wholesaler’s relationship with manufacturers, and even currency exchange rates based on the company’s geographical location. While you can always comparison shop across websites like Alibaba and Wholesale Central, it also pays to use unorthodox channels like contacting manufacturers directly and asking them what wholesalers they recommend.
• Customer Service – Great customer service is a huge factor in picking the right wholesale provider. Can you easily reach someone to speak about an issue? Is there a help desk, live chat or support number available? You want to ensure you’re working with a wholesale provider that’s there when you need it.

Ultimately, it’s important to think about how a wholesale will impact your day-to-day relationship with customers. At the same time, you need to select one that makes financial sense while also having the confidence that you have a business partner you can rely on.

Less Capital Is Required – Probably the biggest advantage to dropshipping is that it’s possible to launch an ecommerce store without having to invest thousands of dollars in inventory up front. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.

With the dropshipping model, you don’t have to purchase a product unless you already made the sale and have been paid by the customer. Without major up-front inventory investments, it’s possible to start a successful dropshipping business with very little money.

Easy to Get Started – Running an ecommerce business is much easier when you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:

• Managing or paying for a warehouse
• Packing and shipping your orders
• Tracking inventory for accounting reasons
• Handling returns and inbound shipments
• Continually ordering products and managing stock level

Low Overhead – Because you don’t have to deal with purchasing inventory or managing a warehouse, your overhead expenses are quite low. In fact, many successful dropshipping businesses are run from a home office with a laptop for less than $100 per month. As you grow, these expenses will likely increase but will still be low compared to those of traditional brick-and-mortar businesses.

Flexible Location – A dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business.

Wide Selection of Products – Because you don’t have to pre-purchase the items you sell, you can offer an array of products to your potential customers. If suppliers stock an item, you can list if for sale on your website at no additional cost.

Easy to Scale – With a traditional business, if you receive three times as much business you’ll usually need to do three times as much work.  By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work.  Sales growth will always bring additional work – especially related to customer service – but business that utilize dropshipping scale particularly well relative to traditional ecommerce businesses.

All these benefits make dropshipping a very attractive model to both beginning and established merchants. Unfortunately, dropshipping isn’t all roses and rainbows. All this convenience and flexibility comes at a price.