[jagath]

Here is the answer I posted on Quora http://qr.ae/tswXk about dropshipping in ecommerce. Main points to note -

Pros of dropshipping - You are not sinking your cash into inventory. So, dropshipping is better for your cashflow. - You can vastly increase your product offering at very low cost because you are just displaying the pictures of someone else's product. You are not buying the product up front. - You don't need to worry about shipping goods, managing a warehouse etc. You just focus on marketing and selling the goods, and you keep the margin (Diff between what the customer paid you and what you owe to the supplier)

Cons of dropshipping - You are trusting your brand with some one else. If the supplier doesn't ship on time, the customer is gonna scream at you, not at the supplier. - Margins are much lower. Since the supplier carries all the inventory risk, they will also eat up the margin correspondingly.

PS: My company Ordoro (http://www.ordoro.com/) offers software that helps ecommerce retailers manage their dropshipping workflow. This includes rules-based notification to your suppliers, and shipping notifications to your customers.