In Kenya dropshipping does have a number of pros and cons to it and you need to understand these before you attempt to get involved in the business. Understanding the following pros and cons will help you to ensure you are making the best choice for you and your business and will also make sure you aren’t surprised by any of the things you encounter as you set up and begin running your business.
Pros
Less Capital
This is, without a doubt, the single biggest advantage to dropshipping. Anyone can launch their own ecommerce store without the need to have vast amounts of capital to invest thousands of shillings upfront in stock. Traditional retailing requires a person to
have money tied up in inventory – dropshipping eliminates that hurdle.
With dropshipping, there is no need to make any purchases until the sale is made and the money is paid by the customer. This allows you to start your own ecommerce business today with little money in hand. In fact, there are even some platforms you can use to set up your ecommerce business absolutely free of charge.
Although these options aren’t usually as successful as other platforms, it is a way to make a little bit of money to put towards creating a better business model.
Easy to Get Going
Running your own ecommerce business has never been easier, especially as you no longer need to handle physical products. When you choose dropshipping, you no longer need to consider:
- Renting or managing warehouse space
- Packing orders and shipping them
- Tracking your inventory for accounting
- Handling returned items
- Having to order products and managing your inventory levels
Low Overheads
The absence of need for you to rent or buy storage space or buy in stock, keeps your expenses to a minimum. Many people in Kenya run their dropshipping business from their own homes using nothing more than a laptop or computer with overheads of less than Kshs 10,000 each month.
As your business grows, these overheads will go up but they will still be lower than owning a brick and mortar business or an online business whereby you need physical stock.
Flexibility in Location
Dropshipping can be done from anywhere so long as you have a connection to the internet. All you need to be able to do is communicate with your customers and your suppliers, and that means you can run your business from anywhere.
Good Product Selection
Since there is no requirement to purchase stock up front, you can give your potential customers a very good selection of products to choose from. Provided your chosen suppliers stock an item, you can put it on your website for sale with no extra costs involved.
This means that if you notice a particular product is rarely purchased, you can continue to have it up for sale without it taking up valuable warehouse space. This also gives you the flexibility to sell a product new to the market without the risk of it not taking off.
This is especially beneficial if you are choosing to sell products that are seasonal or products that are themed off of popular trends like TV shows or movies.
Easy Scaling
When you run a traditional business, the level of business you get is directly related to the amount of work you put in. By making use of dropshipping suppliers, most of the extra work involved in processing orders is borne by them and this allows you to grow your business with less of the pain and hassle of the extra work involved.
More sales always bring more work, especially in terms of customer service but using dropshipping allows you to scale the work better than a traditional business.
Cons
Lower Margins
This is the biggest disadvantage to dropshipping, especially when you are working in a niche that is very competitive. Because it is so easy to get going with dropshipping and because the costs are low, more and more people in Kenya are setting up shop and selling at the lowest possible prices to try to bring in the money.
These people invest little in starting up their business so they can afford to work on the tiniest of margins. In many cases these merchants are likely to have very low quality websites and almost
non-existent customer service but that doesn’t stop potential customers from comparing prices – and, more often than not, they will go for the lowest.
Because of the increase in competition, your profit margin can very easily disappear. The best way to get round this is to pick a niche that is better suited to dropshipping.
Issues with Inventory
When you run a business where you keep your own stock, it is fairly easy to track which items are in stock, low or out of stock. Yet, when you choose to dropship you are relying on other suppliers and these suppliers are not just supplying your customers – they work for other merchants as well.
Thus, their inventory levels change daily. You can use systems that allow you to sync your store inventory with that of your suppliers but this doesn’t always work very well and some suppliers will not support the necessary technology.
This can lead to your customers feeling very frustrated when they think they are going to be able to order a product just to find out that it is actually out of stock, and they are going to have to wait a longer period for a product they have already paid for, or wait for a refund to be processed before they can purchase from another merchant.
Issues with Shipping
Most dropshippers in Kenya work with several different suppliers and this means that the products you sell are sourced through several dropshippers. This model can cause issues with your shipping costs.
For example, let’s assume that a customer has ordered three different products from you. All of these come from different suppliers which means you incur three sets of shipping charges, one for each item.
It really isn’t a wise move to pass those costs on to your customers as they will assume that you are overcharging for shipping and, even if you do choose to do so, automating the cost calculations is not easy.
The best way to do it is average out the shipping cost across suppliers – some you will make a bit of money on, others you will have to pay on. This can also lead to customers feeling annoyed when they order three products from one store and all three products are sent to them individually.
It also makes it more difficult for customers to feel they have control when they are tracking their orders and have three different tracking numbers. Another potential issue is the increased confusion that may arise if a customer is trying to get help with one product but has mixed up the order numbers or tracking numbers.
Issues with Suppliers
Another risk to running an online business that uses suppliers to dropship to your customers is that things can, and do, go wrong. From technical issues to miscommunication, there are going to be times when you and your dropshipping suppliers aren’t on the same page.
How many times have you had to take the blame for something that clearly wasn’t your fault? Even the top dropshipping suppliers will make mistakes from time to time and it is down to you to take responsibility for their mistakes and issue the apologies.
If you use low quality suppliers, you will be taking on more trouble than you can afford, with issues like items that go missing to shipments that are messed up to poor quality packaging – they may not be your fault but it is your reputation and business that will suffer.
One other thing to keep in mind while running a business with suppliers doing dropshipping is that most online retailers work with more than one product supplier. This can easily become complicated since there is no common standard for data formats.
This means things from order processing, account setup, and billing can be different from one supplier to the next. This can lead to complicated and expensive relationships with the suppliers if you mix the details up from one supplier to the next.
This is something to keep in mind when you are deciding your suppliers. A quick note – dropshipping is what you are doing as the owner of the store while a dropshipper is the supplier who provides, packages and ships the products you sell.
Conclusion
I know you are wondering from where do I get all these dropshipping information. Apart from reading several books and blogs , I also have practical experience with dropshipping business. If you feel that you need more information on how this industry operates just comment below and I will assist you accordingly.
In the mean time, I have shared with you these two books that have helped me a lot in understanding how dropshipping works. You will also save yourself from reading many contradicting information here in the internet
