Dropshipping has seen a recent rise in popularity among retailers. With over 2.05 billion global digital buyers and eCommerce sales accounting for over 16.1% of all retail sales worldwide in 2020, dropshipping has become a very lucrative business model. Around 27% of all online retailers have adopted dropshipping, earning, on average, 18.33% more than retailers who’re making sales from their own online stores. Dropshipping can also earn retailers 50% more profit than those who keep their own inventories.
On Amazon, for instance, roughly 5 million active sellers are conducting their business, and about half of all sales on the platform are from third-party sellers. Around 34% of all Amazon sales are fulfilled by dropshippers who posted products there. eBay dropshippers, on the other hand, process, on average, 969 orders per month. That’s roughly $7,731 a monthly profit, or $92,772/Year. However, it’s important to note that eBay dropshipping has a lower profit margin than other eCommerce platforms such as Amazon or Walmart Marketplace.
This article will focus on dropshipping auto parts and accessories and how it works. We’ll also talk about the benefits and drawbacks of dropshpping for automotive aftermarket businesses.
What Is Auto Parts Dropshipping?
Dropshipping is the process of allowing third-party retailers to provide products directly from manufacturers or wholesalers to their customers without holding any inventory. Dropshippers are usually not involved in physically shipping orders, invoicing, and other tasks necessary for producing sales transactions. Instead, dropshippers act as a go-between the retailer who is selling items online and the manufacturer or wholesale company that provides those items.
To put it another way, dropshipping is a distribution model in which retail shops do not have possession of the goods. They instead collaborate with wholesalers/manufacturers and deliver the goods straight to the client. Assume a dropshipping firm is selling automobile parts over the internet. It will not spend money on manufacturing or inventory management. The retailer would forward the client order information to the wholesalers/manufacturer, who would then ship directly.
The marketing of the platform, maintaining an auto parts catalog, and generating new leads will be the primary objectives for an auto part dropshipping business.
What Are The Pros of Auto Parts Dropshipping?
There are a few reasons why dropshipping auto parts is beneficial for retailers. Among those reasons, we can include the following:
- Low startup costs: Retailers don’t need to spend money on inventory, as they’re sourcing products from a wholesaler or manufacturer. This also means that there’s little risk involved with starting a dropshipping business. If something doesn’t sell, the retailer isn’t left with hundreds (or thousands) of unsold items taking up space in their garage or warehouse.
- Increased flexibility and scalability: Since dropshippers don’t need to carry any inventory, they can quickly scale their business by increasing or decreasing the number of goods they’re selling without having to worry about excess stock or storage space. Additionally, since the dropshipping supplier fulfills dropshipping orders, retailers can focus on growing their business instead of dealing with order fulfillment.
- Access to a wide range of products: dropshipping allows retailers to offer a much larger product selection to their customers than they would be able to if they were selling those items themselves. This is because dropshippers don’t need to limit their catalog to things in stock at their warehouse. They can forward any customer order request to the dropshipping supplier, who will ship the ordered item(s) directly from their warehouse.
- Low overhead costs: Since dropshipping doesn’t require any inventory or manufacturing, most of the costs associated with running a traditional eCommerce business, such as shipping and warehousing, are eliminated.
- No need to worry about fulfillment: Since dropshipping orders are fulfilled by the dropshipping supplier, retailers don’t need to worry about order fulfillment. This allows them to focus on growing their business and increasing sales instead of fulfilling orders.
That said, there are a few drawbacks of auto part dropshipping.
What are the Drawbacks of Auto Part Dropshipping?
Although dropshipping offers many benefits, it’s not without its drawbacks. For example:
- Restricted to dropship suppliers with excess inventory: Some dropshippers are forced to limit their catalogs because they don’t have access to every single item that wholesalers offer. If a supplier doesn’t carry an auto part in stock, for instance, the retailer couldn’t sell it even if they wanted to. That’s unless someone else had it available at their own warehouse or were willing to source and ship the item directly from the manufacturer/wholesaler themselves instead of via dropshipper.
- Limited product selection: Dropshipping also limits retailers’ ability to customize products based on each customer purchase request. Since dropshipped items must be sourced from a predetermined supplier catalog, retailers can’t always offer the exact thing that a customer is looking for. This can be not very reassuring to customers and may cause them to shop elsewhere.
- Potential for delayed shipping: Although dropshipping suppliers typically have quick turnaround times, there are instances when orders may take longer than expected to arrive. If this happens, it could lead to negative reviews and loss of future business.
- Inability to build long-term relationships with dropship suppliers: Because dropshipping relies on third-party suppliers, retailers don’t have as much control over the quality of service or products they provide their customers. This could lead to dissatisfaction down the road if something goes wrong with an order or dropship supplier.
- Inability to keep up with dropshipping demands: Dropshipping is a very demanding business model, especially for those retailers who are just starting out or have limited resources available to them. Retailers must constantly monitor sales trends and related data to determine the best dropship suppliers from which they can source their inventory and how much of each product to stock on-hand at any given time. This additional work not only takes more effort but also requires that retailers spend more money on things like analytics software and other tools that will help them manage their dropshipping business efficiently over time.
- Fees associated with dropshipping: In addition, some dropshippers charge retailers extra fees if an item is sold for a price that is below the dropshipper’s suggested retail price (MSRP). This can be frustrating because it means retailers may not be able to always offer their products at a lower cost than what they would if they were selling them through other sales channels.
Despite these drawbacks, dropshipping remains one of the most popular and profitable eCommerce business models available today. And with the right planning and execution, it’s something that automotive aftermarket retailers should consider adding to their businesses to increase sales and profits.
To summarize, dropshipping is a great way for retailers to increase sales. However, dropshipping does have a few drawbacks. That said, dropshipping is still a viable and popular eCommerce business model that retailers should consider adding to their businesses. When it comes to the automotive aftermarket sector, dropshipping is a great option to consider. The many benefits that dropshipping has to offer when it comes to selling auto parts and accessories will far outweigh the drawbacks that this business model has to offer.
For more information on dropshipping and how it works in the auto parts industry, feel free to contact us directly.