Starting a business involves investment, risk, bureaucracy, logistics and, mainly, a lot of stress. The (direct shipping, in English) emerged as a alternative online sales model which is mainly based on the intermediation between a supplier and the final consumer, and that, like everything in this life, has advantages and disadvantages. In this article we will explain what the process consists of so that you can evaluate if it is an option that suits your needs.
What is dropshipping
One of the clearest definitions of the term can be found in the “How to set up an online store… and make it sell!” where it is explained that the dropshipping business occurs when who offers the product online is not the owner of it, nor does he pay a logistics company to host, treat and ship it, nor has he bought it. He only really buys it when a third party buys it from him first through the web.
For logistical purposes it is the same, but at the business level it is substantially different since the seller it only has a virtual catalog of products that it acquires on demand and whose shipping and packaging is borne by the dropshipper (original supplier of the product). Then, the purchase goes directly from the warehouse to the customerwithout passing through the hands of the intermediary at any time.
East B2C sales system (business to customer) implies to three actors well differentiated:
- Buyer: make the purchase online.
- Seller: manages the sale through the web, collects the money and intermediates the purchase, shipment and post-sale with the supplier.
- drop shipper: receives the order from the intermediary, invoices him for the product and sends it directly to the final consumer through his logistics network.
There are several dropshipping models implemented by eCommerces of all kinds, from the smallest who cannot afford a logistics infrastructure, even the biggestWhat or the Spanish wholesaler which has managed to generate a dynamic and profitable mechanism.
In the latter case, for example, it is a business model in which the online store sells and the same company makes the shipments. Its customers are eCommerces that are responsible for selling, charging and serving the customer. Every time they make a sale, it is automatically transferred to the BigBuy platform, which is in charge of sending the product to the final consumer.
Advantages of the model
It turns out a attractive system for testing new and small-scale projectssince when handled entirely online does not require a large investment and it does not imply leverage and risk buying the product previously. Tea you save the administration and payment part cost of a depositpack and Send your orders, control inventory for accounting purposes, deal with returns and internal shipments, continuously order products and control the stock.
Secondly, although your real stock is null, the one you can offer is infinite. you simply need partner with the right providers to ensure the existence of the product and its delivery in a timely manner. This is essential if you want to have good references, so it is recommended to choose carefully who you are going to work with. The big enterprises They are the most likely to meet these requirements.
Finally, even if you start with a very reduced offer of products and services, if everything goes well, dropshipping will allow you to grow a lot in a short time. If from one day to the next a customer orders 30, 50 or even 100 units of a product for now, a small business will probably not be able to meet the demand and will lose the customer. With this modality, you just have to manage the purchase without having invested in scale production.
the negative side
Inevitably, there are benefits that you have to give up if you want to reap the benefits. First, the profit margin is much lower than if you were the actual owner of the product. With dropshipping you simply charge a commission for managing the sale, which is usually between 5% and 25%depending on the type of product and the provider you have chosen.
Second, you have fewer differentiation options: you risk it with very good marketing or, worse, at price, because your supplier is undoubtedly serving many others like you. With the dropshipping model you are offering the same product as another dozen online storessomething that prevents you from creating a unique brand and differentiating yourself from the rest.
Finally, one of the great disadvantages of the model is that You depend on a third party. That is, you answer for another and if this other does not comply, the problem will be yours. That is why we clarified the need to choose suppliers wisely in order to avoid bad drinks. The type of product you choose to sell will also play an important role at this point, because if you offer something unusual you will probably not be able to choose between many dropshippers and you will fall back on smaller industrieswith less stock and less logistics capacity.
On the opposite side, if your website has various products from different suppliersthe monitoring of the purchase and delivery process will be more complex will need a good organization from you
So, is dropshipping convenient or not?
Well, as we would say in Galicia: depends. Of what you need, of what you are looking for, of what you are willing to do. Without a doubt, it is a innovative and attractive modelbut not necessarily superior to that of a traditional store.
They are not proprietary models either, so you can combine them to extend your offer and expand the market or use dropshipping as a principle of low-cost entrepreneurship that could mutate into something much bigger in the long run. The beginnings are always difficult, but once you oil the gear it is business structure can be very convenient.
What you should keep in mind is that To make a difference you will have to take care of the following aspects:
- Make a comprehensive market analysis before undertaking any type of business (competition, target audience, external threats, internal strengths and weaknesses, opportunities).
- Take good care of him design of your website (usability and user experience, content marketing).
- become devoted to worked and combine it with SEM to improve your position in Google.
- Don’t underestimate the power of webmailing.
- invest in advertising on-line.
- Offers shipping facilities, returns and after-sales services.
- And for the third and last time: Choose your suppliers well.
If you are clear about your goals and pay attention to these key factors, I will surely be one of your many clients soon 😉.
Photo: Depositphotos.
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