Hardly any other topic is as hotly debated in e-commerce circles as dropshipping. Because this model makes it possible for online retailers to start their own shop without first investing huge amounts in the inventory. However, this model, which promises quick success with little capital investment, is also associated with dangers. We clarify what is really behind it and what it takes for a successful online business. In this article, I will guide you What is dropshipping business? How can i start my first shop? How it works.
Dropshipping – what is it?
Literally translated, the term Dropshipping means nothing more than party business.
This means that the shop operator only buys the products as soon as they have sold them.
The dispatch is then usually carried out directly from the supplier to the customer . Unlike in traditional retail, the shop operator has no contact with the products and does not need a large inventory for the operation of his shop.
The end customer who chooses a specific product is only in contact with the dealer and initially does not know whether he will receive the product from the dealer or from the supplier. The job of the seller, on the other hand, is to manage the shop and win as many customers as possible.
When he receives an order, he contacts his supplier – usually a wholesaler – and sends the order details and customer data to them. The seller makes his profit by the difference between the amount he charges the end customer and the price that he has to pay to the wholesaler.
The dropshipping provider, in turn, packs the ordered product after an order has been received and sends it to the end customer. All shipping formalities from distribution costs to customs are taken over by the supplier.
What are the advantages of dropshipping?
According to previous dropshipping experiences, entrepreneurs who want to get started in the field of e-commerce will benefit in particular
The shop operator only buys the product after an order has been received and the end customer has paid. So he doesn’t have to buy and store large quantities of the products he wants to sell. This also saves him having to worry about not being able to sell some products and having to store them anyway. In addition, a loan does not normally have to be taken out to start the business.
For the reasons mentioned, the shop operator can also sell a larger number of products because he does not have to pre-finance them.
In addition, there is the advantage that a dropshipping shop can be operated from anywhere, provided the operator has an internet connection because no warehousing is necessary. This makes it easy to make money online with dropshipping.
What are the disadvantages of dropshipping?
However, there are also disadvantages. For example, the shop operators have no influence on the satisfaction of their customers with dropshipping. Because even if the shop is user-friendly and well designed, the operator has no influence on when the shipment is made or how long it takes until the product is delivered to the customer.
In the worst case, the product does not even reach the end customer, which naturally leads to trouble.
In this case, the less stressful way is to refund the purchase price.
However, according to the drop shipping experience, there is another disadvantage: If a shop operator works with several manufacturers or wholesalers, the shipping costs may add up if the end customer orders products from several suppliers. However, the shop operator should not charge the customer for these higher shipping costs but should pay them himself so as not to spoil the customer. This, of course, also has a negative impact on the profit margin.
Because the competition is usually very big so that no huge surcharges are possible. In order to assert themselves on the market, the owners of the shops should in no way engage in a price war; it is better if they expand their shop to a brand and stand out positively from their competitors vis-à-vis customers.
There are always problems
If there are problems with the customers, the shop operators should not be put off by this.
For which areas are dropshipping suitable?
Almost every company can choose dropshipping as a distribution channel. Here are a few examples:
1. Own online shop
The dropshipping distribution channel is most often used in online shops because this considerably simplifies the processes
2. Existing marketplaces
Many online retailers who are active in e-marketplaces such as eBay or Amazon also use this strategy. They also benefit from the fact that the marketplaces are visited by many customers and therefore there is a chance that they will see the products and possibly buy them.
However, in this case, the traders must adhere to the requirements of the marketplaces. For example, Amazon prohibits the sale of certain products, although there are sometimes different regulations for different countries.
3. Over-the-counter retail
Dropshipping is also becoming increasingly popular in stationary retail. More and more retailers are starting to no longer keep the products in stock, but only to exhibit them and only order them when a customer wants to buy.
This saves the store owners high storage costs and may not have to send bulky goods.
It’s that easy to start
If you want to start dropshipping in your online shop, you should first look for a suitable product and supplier. As soon as the decision for a certain product has been made, the shop operator should contact the manufacturer in the next step. If the manufacturer only offers sales from certain quantities, the shop operator can switch to a wholesaler.
Ideas for products can also be found on various marketplaces on the Internet. However, a single product is not enough. The shop operators should therefore also better inform themselves about the latest trends and also try one or the other marketing strategy.
A constant exchange with the supplier is also important. Because the better the seller is informed about a product, the better he can inform his customers about it. Anyone who constantly exchanges ideas with their suppliers may also be preferred by them.
This should be taken into account when selecting the provider
Last but not least, how successfully a shop develops depends on which suppliers the seller chooses. After all, he is responsible for ensuring that the ordered products arrive at the end customer on time and in good condition. The following aspects are important to find the right supplier:
Is there a catalog and regular changes?
Some dropshipping providers have an extensive catalog with numerous products, while others specialize in certain industries. If a seller chooses a provider with a large range, he has the advantage that he can expand his shop at any time by adding more categories without having to look for a new provider.
It is no less important that the provider also regularly has innovations or new products in its range.
Good synchronization of the systems should also be ensured. This affects not only the catalog and the orders but also the storage and shipping. However, because the current systems with CSV files are very labor-intensive, many providers now offer further synchronization options.
The supplier should not only offer good conditions but also work transparently when it comes to shipping defective products, returns, and cancellations. In the best-case scenario, the supplier offers an individual service in several languages.
If a dropshipping provider delivers to several countries, the seller must ensure that this also happens smoothly. It is therefore advisable to select suppliers who work with different transport companies so that shipping abroad is also not a problem.
Important: customer support
Returns are part of the daily business of shop owners, especially when it comes to clothing. Because many consumers order clothing in different sizes and only keep the right piece.
Of course, he should also involve his supplier, because he has to offer a solution if there is a problem with the end customer. In the best-case scenario, the returns are handled entirely by the supplier.
The conclusion to dropshipping
According to the drop shipping experience, this sales channel offers numerous advantages, but also some disadvantages. At the same time, the operators of online shops have the opportunity to address a large number of potential customers without having to spend a lot of money in advance.
This gives newcomers to the world of e-commerce an excellent opportunity to gain experience before continuing to expand their online business idea. By the way, new customers can be won over with the appropriate Facebook apps, provided that they are used correctly to make the shop grow slowly but surely.
However, the shop owner should not forget that dropshipping also means a lot of effort. Apart from the fact that you need good shop software, you also have to make the shop known, so invest a lot of time in marketing.
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