If you are into the topic of e-commerce, sooner or later you will come across the term dropshipping. But what is it all about? We get to the bottom of the question.
This is what dropshipping is all about
So-called dropshipping is a type of online trade in which the online retailer offers items without even having them in stock. After receiving the customer's order, the dropshipping provider orders the goods directly from the wholesaler or manufacturer via the online shop, who in turn sends them directly to the customer. The dropshipper sells without direct contact to the item and therefore does not need its own warehouse. Basically, dropshipping is a service provided by the wholesaler or manufacturer to the respective shop. Ideally, the customer does not even notice that the product ordered does not come directly from the seller. The package should only show the logo and return address of the shop where the product was purchased.
Dropshipping is now done in different ways. A basic distinction is made here between fulfillment through a wholesale warehouse or through a consignment warehouse. The first variant is characterized by the fact that the dropshipping provider has access to the wholesaler's entire inventory. If an item is no longer in stock in the wholesaler's warehouse, the order in the dropshipper's shop can no longer be carried out. In the second variant of dropshipping, the wholesaler provides the dropshipping provider with a separate area in the warehouse that is only reserved for items in the online shop. However, this also results in additional costs for the online retailer, since setting up the exclusive storage area naturally also costs money.
Benefits of dropshipping
A big advantage for dropshipping providers is the low cost of equity. There is no need to rent premises for the company, and additional staff does not have to be paid. In addition, the online retailer does not have to make advance payments for their products. Only the website or the online shop and any associated app need to be programmed and maintained (costs for domain and storage space). There are even ready-made complete solutions for successful dropshipping from various providers. The provider Shopify offers its customers complete packages for dropshipping shops..
Disadvantages of dropshipping
The advantage of dropshipping, not having to have your own warehouse or products, is also the disadvantage: Since the seller never sees his goods, he also lacks any control over the product and shipping. The quality of the goods cannot be assessed by the online retailer himself. This is often unsatisfactory, especially for articles from China. So there is a risk of dissatisfied customers and a lot of returns. Returns management in the dropshipping business is also a logistical challenge. Also, the competition in the dropshipping market is huge. Many retailers sell the same products. In order to have long-term success in the dropshipping business, retailers should therefore invest time and money in the so-called "branding" of their products.to ensure a unique selling proposition for the goods on offer.