Starting an eCommerce website without an inventory is very possible in this day and age. In the past, to start a commerce business store, you needed to have a store and a warehouse. These days, your eCommerce website can have thousands of products and you wouldn't even be required to have any inventory whatsoever.
A lot of people want to start an online store and the major concern for them is where to store their goods. That's 100% possible with this tool called the internet. While you can start an eCommerce store without an inventory, you cannot run an eCommerce store without inventory, (unless you run a service-based business).
Looks as if we're going back on our word? We're not, stay with us.
You can run an eCommerce store without having any inventory, correct. But you cannot run it without inventory. If a customer bought a product from your store, it's very possible to have the goods delivered to them without you having to see the goods. This means while you don't have the inventory, someone else has.
Three Ways to Run an Ecommerce Website Without an Inventory
There are three ways to run an eCommerce store without having any inventory. They are:
2. 3PL – Third Party Logistics
3. Amazon FBA
Dropshipping is a popular term in eCommerce where a supplier (eCommerce store owner) doesn't keep the products it sells in stock. Rather, the eCommerce store purchases the item from a supplier, a manufacturer or a wholesale website such as AliExpress, Oberlo etc., and the supplier ships it to the customer. This way, the eCommerce store owner is free from keeping any form of inventory.
The main difference between dropshipping and a regular retail store is the drop-shipper isn't required to keep any form of inventory.
What are the Benefits of Dropshipping?
Dropshipping is very easy to get started. Because of this model of starting an eCommerce store without any inventory, you don’t have to worry about paying for or managing a warehouse, processing and shipping orders, handling returns, keeping stock or keeping track of inventory. Here are more benefits of dropshipping.
Less Capital is required
The fact that very little capital is needed to start dropshipping is one of the biggest advantages. With dropshipping, you can start an eCommerce store without having to spend a dime owning inventory upfront.
If you had to run a regular retail store, you would be required to have hundreds, if not thousands of physical products housed in your retail shop. To be able to afford that would cost a staggering amount. But with dropshipping, your eCommerce store can house over 1000 products and you wouldn't be required to purchase a single one.
Very Low Overhead
With dropshipping, the stress and conditions that come with owning inventory (e.g. managing a warehouse) are inexistent. Your overhead expenses are ridiculously low. To run a successful eCommerce dropshipping business, all you need to own is a laptop and other minor expenses such as website hosting and the fees for the eCommerce platforms you'll be getting products from. With these very few expenses, your overhead is almost inexistent compared to owning inventory or running a retail shop.
Also, a dropshipping eCommerce without inventory can be run from anywhere, as long as you have a laptop, a steady internet connection and can communicate freely with suppliers and wholesalers.
Large Selection of Products
One of the perks that come with dropshipping and running an eCommerce store without having an inventory is the large selection of products. Because you don’t need to physically own products before you sell them, you can add as many products as you want to your eCommerce store. As long as the supplier has it, it can be added to your store.
Ability to Scale Easily
To scale as an online store without an inventory is ridiculously easy compared to scaling as a retail store that stores inventory. If a retail store were to scale and increase by three-fold, they would three times as much manpower, storage facility, etc. But to scale as an eCommerce store without inventory, all you would need to do is list more products in your eCommerce store, possibly pay a little more to your suppliers and handle more customer service queries. Compared to how difficult and tasking it is to scale as a brick and mortar retail shop, scaling as an eCommerce store without inventory is relatively easier.
Disadvantages of Having an Ecommerce Store
While it is easy to run an eCommerce store without inventory, it is not all rainbows and roses. Here are some disadvantages of running a dropshipping eCommerce store.
Low-profit margin is easily the biggest disadvantage associated with running a dropshipping based business. Because of the low overhead required to start, many stores can afford to sell their products at extremely low prices. And to stay afloat in the market especially in a competitive niche, you would need to meet their prices in the gallows.
Inventory Issues and Shipping Complications
One of the benefits associated with keeping an inventory is that you’re aware of the number of products you have. When running an eCommerce store without an inventory, you’re often left unaware of the number of products left with the supplier. Modern eCommerce platforms have found a way around this where they update in real-time the quantity of products left, but it isn’t very reliable.
When running a dropshipping business, you often have to source goods from separate suppliers and each of them with their delivery method. This can create serious complications associated with shipping products to consumers.
3PL – Third Party Logistics
Third-Party Logistics or 3PL is another great way to start an eCommerce store without keeping inventory. What a 3PL does is handle the storage of your products or goods and fulfil orders. In some cases, they provide additional support by providing customer support and product returns.
Unlike dropshipping where you don't have to buy a single inventory beforehand, with third-party logistics, you have to buy products beforehand. The only difference is that you don't have to store the inventory yourself.
With third-party logistics 3PL, you ship all your products to the 3PL service provider and they handle all the storage/warehousing needs. So, when a customer places an order, your website sends the order to the third-party logistics company and the logistics company ships the order to the customer.
To employ the services of a third-party logistics company, you pay a monthly fee and additional fees per delivery.
Third-party logistics works almost the same way as regular stores except with 3PL you don't deal with the storage of the products. 3PL is encouraged if you're in a super niche market where you don't sell hundreds or thousands of products because it would cost a lot for the 3PL to cover the storage costs.
Unlike dropshipping, where the overhead is ridiculously low, with 3PL you're going to need some capital to purchase the goods upfront.
If you’re a manufacturer that sells unique products in your eCommerce store but can’t afford to handle the storage and shipping of products, 3PL is a great option as all you’ll be required to do is to send them the manufactured products and they handle all the other aspects.
Amazon FBA stands for “Fulfilment by Amazon” and it's a service rendered by Amazon. Amazon FBA is essentially a 3PL service provided by Amazon. There isn't much separating it from a regular 3PL company other than the fact that it's – you guessed it- provided by Amazon.
With Amazon FBA, eCommerce store owners can run their business without having to hold inventory because Amazon handles all the inventory stocking and delivery of the products.
There are advantages and disadvantages to using Amazon FBA services. If you use Amazon FBA, when a product is shipped to your customers it comes in Amazon branding labels. If you’re not altogether serious about building a brand, this can be a good thing as you’re able to hide under the umbrellas of the eCommerce giant that is Amazon.
On the other hand, if you’re serious about building a brand, this may not be the best option for you. Although with additional cost, Amazon can ship your products with your branding. It’s left to you to decide which package you’ll be subscribing to.
Like everything else that comes with eCommerce, setting up a store without inventory is filled with options that are ultimately up to you to decide. The idea of selling a product that you don’t particularly stock is the driving force of commerce today. Take instances from Alibaba, Uber and Facebook etc. These companies are giants in their respective fields but they don’t own any of the things that they're known for.
In this article, we have listed out the major ways to start an e-commerce store without inventory. It’s now left to you to decide the best route to take.