For a startup e-commerce or online trading business, the first word that typically comes to mind is dropshipping. If the word dropshipping is new to you: it means that you sell an item without keeping any stock and the dropshipper sends them directly to your customer.
Dropshipping is a good move for new businesses with low capital as it frees up your capital from carrying too much stock at the beginning, after all in my earlier postings I stressed that cash flow is vital for a business.This method also saves your time in packing and shipping.
The main advantage is that you can offer a wide range of products to sell quickly!
However, there are several drawbacks to dropshipping. Firstly is that you cannot be certain what your supplier has sent out, whether it was in a complete package, damaged or sent wrongly. It can lead to a customer service nightmare... Aside from this the margins are typically very low, usually less than 10% and over time this low margin might restrict your future business expansion or to even provide discounts for returning customers.
Low margins means it is also less motivating for you to put more effort into selling, unless you have a wide audience to target.
And let's get real, dropshippers aren't going to rely on just you, they have many others working for them so it is very likely there's more than 100 others selling a steam iron exactly like yours. You will have difficulty keeping loyal customers too as many other online sellers are offering the same product(s)... unless everyone sells them at the same price (yea right!).
The key point here is to be ready to stock up when the time is right. Earlier in my business, I started with dropshipping but as business picked up I took the opportunity to stock up in advance, for a much higher margin and was able send them items immediately upon payment. The margins I received were much higher (at least 4x more than the usual) allowing me to focus more on selling and marketing the product.
So, it's good to start off dropshipping but it's not the best solution in the long run.
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