The drop shipping It is an online sales model that generates quite a bit of controversy in the world of digital businesses and that is among the options most used by entrepreneurs in recent years.
Selling online can be a challenge for many business owners. Taking the digital step, at first, may seem like an impossible mission, but I must tell you that it is not thanks to models like the drop shipping.
In this article, I am going to tell you the harsh truth of this method that has great fans, but also detractors. are you coming with me? 🚀
What are the business models in online sales?
Before , there are different business models to make sales.
- Own production
- buy wholesale
- drop shipping
I will explain each one below.
Own production
A first option where brands are responsible for the development and production of their products. They offer them in their store and once the purchase is made, they send it to the customers to the chosen destination.
buy wholesale
In this second option, brands buy products in bulk, that is, in large quantities to get better prices. They thus generate their own merchandise inventory with the possibility of adding value in the process. Depending on their availability, they are selling in their online store and dispatching the shipments.
drop shipping
Unlike the previous ones, dropshipping is a model that works without its own stock, since it only buys from its suppliers what it sells in its virtual store.
How does dropshipping work?
When we talk about dropshipping we refer to process of making sales online without own stock.
Here, the seller is in charge of making the sales in his online store, and then placing the orders with his supplier (without seeing the products, since the shipment is made directly from the place of manufacture to the final customer).
Namely, the supplier is the one that sends the product directly to the buyer.
How is the profit in dropshipping?
This method positions the seller as an intermediary between the manufacturer and the final consumer. This intermediary is in charge of selecting the products at a low cost and adding a profit margin, to later publish them in your store at a higher price.
Dropshipping: why yes and why not?
To continue understanding this business model, join me on a tour where I will explain what the advantages and disadvantages really are.
Why should you dropship?
- Low cost of entry.
- Quick start-up.
- Minimal risk.
low cost of entry
A large investment is not needed to start selling, since there is no stock of merchandise. Simply by opening the online store and starting to generate traffic to it, the business is working.
Quick start-up
This low cost of entry will also make the time it takes to start the business really fast. Once you’ve decided what you want to sell, you’ll be up and running in no time.
minimum risk
The fact of only buying what one sells brings a certain peace of mind. There is no possibility of producing or buying something that is not successfulthus leaving a high value in stagnant products in a warehouse.
Learn more…
Article
Sounds ideal, right? Who would not want to have a fast business, with low costs and minimal risks?
This is where I want to dig a little deeper. The disadvantages of dropshipping are not entirely clear, until one begins to analyze this business model in more depth.
Why you shouldn’t dropship?
- High competition.
- Little control in customer service.
- Low profit margins.
high competition
Just as one would easily get access, with a low cost of entry, many others will be able to as well. This is going to translate, basically, into a lot of competition. The products you decide to sell in your store can be in the same way in the store “next door”. Also, they could very easily copy you since the products can be obtained from the same supplier (because they do not have any process of your own brand).
Little control in customer service
As we saw, it is the supplier who is in charge of direct shipping to your customers. So you will not be able to have control over that process. But if there are mistakes in the products or defective merchandise, you will have to take responsibility for it. Whether for exchanges or returns, you must be ready to respond.
The service to your consumers, then, will not really be in your hands. Y this is a big problem since you will not be able to retain customers for future purchases. They are going to be aware only of the prices and, faced with a cheaper find, they will not hesitate to buy in another store.
Low profit margins
The dropshipping model does not allow for high profits since when buying the finished products, there are fewer opportunities to play with the margins. So, it is necessary to sell a large quantity to be able to exceed the balance point between income and expenses, and to be able to see a real return.
dropshipping example
Imagine that after making a sale, you see that there is an opportunity to sell pet accessories (leashes, collars, food dishes, etc). Then you look for a supplier of those products with low costs (for example, ) and make sure they have the option of delivery with dropshipping.
The next step is create your online dropshipping store posting the pet accessory products you selected from the supplier. You can use their images, adjust the description and put the final price (with my profit margin included).
Now, it’s time to promote your store to generate traffic and thus sales. Online advertising and advertising, such as Instagram and Facebook, will be a key element in this step.
With each purchase you receive, you will make that same request to your supplier. In the data of the recipient of the package, you will put the information of each of the clients. In this way, the producer will do the packaging and shipping process.
Your customers will receive their orders directly to their doors. You will keep a margin between what my buyers paid you and what you spent with the supplier.
There are online dropshipping stores that work only with this methodology. On paper it sounds very attractive, with promises of low risk and the impossibility of keeping unsold inventory.
conclusion
Is dropshipping for you? The truth is that there is no correct answer. This business model has its risks, but also great benefits if one has the ability to find the “hot” products of the moment and the right suppliers.
It’s also a way to test the market before diving into a particular industry or product line. The important thing is to define what type of business you want to build and from that, understand if the dropshipping methodology suits it.
Facebook Comments
Disqus