But what is dropshipping, and how exactly does it work? That’s what we’re going to show in today’s post. Follow the next topics to find out!
What is dropshipping?
The term dropshipping was born from the combination of 2 words: drop, which means drop, and shipping, which can be translated as a shipment. Knowing this origin makes it much easier to understand the usefulness of virtual stores’ technique: basically, leaving the delivery and stock of products to another company.
With dropshipping, e-commerce sells the product and sends the order for this transaction to the partner supplier. The supplier will send the item to the customer in the name of e-commerce, whose profit is the difference between the price charged to the user and that charged by the partner. See how there is no mystery?
If you have not heard of this technique, you may think it is relatively new. But in reality, it is not quite like that. TV channels and even some radio stations have used this logistics management model for many years, offering in their programming some products that could be purchased over the phone.
What benefits does it bring?
At this point, you must be wondering if it is worth betting on this type of technique for business, and what are the real benefits of dropshipping. So keep an eye out to clear up these doubts once and for all!
Less capital is needed to start entrepreneurship.
From the side of those who sell, dropshipping is a great choice, as it makes the entrepreneur not have to invest in a massive inventory of products before getting his hands dirty.
On the other hand, on the part of the supplier, the technique helps the company focus on a smaller number of details, such as maintaining e-commerce, online advertising, and even sales support.
It is much easier to start your online business.
If your company does not need to handle the products to be delivered physically, the sales process is much more comfortable. After all, after the sale, your part of the operation will be limited to observing numbers and continuing the cycle, generating more sales.
It guarantees regional flexibility.
Are there no warehouses available where you live? Is the rental price too expensive? Is it challenging to take care of shipping logistics in the region where you work? With the dropshipping system, none of this is a problem.
It is a possibility to offer a broader range of products.
As you do not need to have the product on hand to offer, it is easier to sell some less sought-after niche items, even creating the possibility to test some new markets and new product mixes for your online store.
It’s easy to scale your business.
Whoever has a traditional company knows that if the business doubles or triples in size, it is necessary to double or triple the investment. In a brand that works with the dropshipping model, this account usually closes more easily.
This is because, in the case of sharp growth, the inventory and logistics portion can be passed on smoothly to suppliers (current or new), as long as they meet the demands. You can understand a little more about business scalability by checking our post on the difference between profitability and profitability.
And how it works?
Did you like everything we’ve said so far, and are you already thinking about applying this technique in your virtual store? First, understand a little more about how dropshipping works in practice!
The choice of suppliers
First, you must choose the best suppliers for a given product, taking into account the price charged by them and the quality of delivery and even your inventory and shipping monitoring.
The offer to the user
Once the supplier is chosen, it will show the respective quantities you can put on sale in your e-commerce according to the product and, of course, for what price. As everything happens in real-time, when a customer makes a certain purchase, the order is automatically processed by your online store, which sends the order to the supplier and generates the invoice.
From supplier to customer
The part of packaging the product and sending it to the customer is up to the supplier, who is still responsible for generating the company’s tracking code.
In case of return
Suppose a customer needs to exchange or return the purchase. In that case, almost the entire return process is also up to the supplier – less, of course, contact with that customer, which is always the online store’s responsibility. Remember: stock and shipping are invisible!
Finally, it is good to clarify that, in every buying and selling process using dropshipping techniques, the supplier’s side is invisible to the consumer. From the moment of purchase until the time he receives the product at home, only his brand was present in the transaction. Therefore, it is essential to find committed partners who will look after your company’s name in the market.
Ready! Now that you know what dropshipping is and how it can help boost your business – or even get it off the ground! How about looking for some business partners and get your hands dirty?
Dropshipping: know the advantages for your e-commerce
If you own your online store and are always looking for news in this field, you probably have heard of the term dropshipping.
It is a reselling method, in which the reseller in question does not store the products to be sold in its stock, but rather, sells them directly from suppliers.
As the reseller receives a purchase order request from a specific customer, he requests the product in question with his supplier and makes payment with him!
How does the dropshipping process work?
Orders from suppliers can be placed in a variety of ways: either via the internet, via catalogs, promoters, or by moving the dealer to his supplier.
The reseller in question must make the right choice of its suppliers, who must meet their demand with high-quality products and, in the right quantity, offer good negotiation conditions and, of course, comply with all delivery times for the products.
Having quality suppliers is essential to the success of the dropshipping method. Several suppliers offer a series of products to the respective sellers in exchange for a monthly payment, thus providing a much more agile delivery.
What are the advantages of dropshipping?
This process allows resellers to dedicate themselves exclusively to the sales part of the products, specifically since they do not need to control the stock and only buy from the suppliers the products that will have an immediate market outlet and have already been requested by customers.
Without having their stock, the salespeople have significant cost savings related to this process. They do not have to worry about capital formation and maintenance of stocks, packaging, and storage spaces.
Another advantage of the dropshipping model is the excellent flexibility of operation. The dealer only needs a location with internet access to communicate with its suppliers without working in a specific physical space.
Another advantage is that you do not have to worry about the product delivery process, which is the supplier’s full responsibility, who forwards the product to the customer on behalf of your online store, thus bringing enormous practicality.
And the risks?
Relying exclusively on dropshipping leaves resellers completely hostage to their respective suppliers, who may not have some of the products requested by customers in their inventory or delay the delivery period, since they can serve several resellers.
These delays can occur mainly if they are imported products since, in this case, more incredible bureaucracy is required, and there is no control over the logistics process.
Therefore, dropshipping does not present any exclusivity to resellers with their suppliers. These are factors that can drastically compromise the resale process, generating severe losses for resellers. So the tip is to study the market well and look for suppliers that offer monthly dropshipping plans, as we talked about earlier.
It is also essential to carefully study and plan suppliers’ choice, always looking for references from other customers, and check their history of failures about the aspects above of stock availability and delivery deadlines.
Dropshipping also presents risks to the reseller to the extent that even after the customer has ordered a product and subsequently purchased this product from the supplier, there is the possibility for the customer to cancel the purchase, thus causing a situation of financial loss until he finds a new buyer.
Who is dropshipping recommended for?
Dropshipping is an excellent alternative for retailers who operate in isolation or have their virtual store and retail micro-companies, which, being in an early stage of the business, do not have a large physical structure to store your stock.
This way, they can use space only to sample products in a catalog and receive customers’ purchase requests.
Companies that do not want to spend money on hiring salespeople, for example, can also use dropshipping.
How to perform dropshipping efficiently?
Now that we understand how the dropshipping process works, what are its advantages and possible risks, it is essential to show some tips to carry out this business model in the best possible way and minimize the occurrence of errors:
Analyze the products made available by your suppliers
Before requesting the products that will be passed on to your customers, it is essential to study your suppliers calmly and analyze the competing sellers in the market to identify a work that can become a differential for your customers and thus stand out from the competition.
Logically, it is essential to order products that have a guaranteed demand and have already been requested but bet on some experimental products and check the acceptance before the public, but of course, in small quantities.
Ask your customers for feedback.
After a certain period of operation of your online store, it is essential to get in touch with some customers who have already bought your products more than once and are already somewhat loyal to your brand.
Ask them what they think about your store and ask their opinion before launching a new product.
Your most loyal customers represent your customers’ profile in general and know what are the needs that lead to the consumption of your products.
By requesting this feedback before launching a new product, the chances of error are minimized, and public acceptance tends to be more generous, thus increasing your sales volume.
These satisfaction surveys can be done by phone or through social networks. Thus, it is essential to have an excellent system to register customers and store all the information filled in during these consumers’ purchase process.
Choose good suppliers
As we mentioned earlier, having the right suppliers is essential for your dropshipping strategy to be successful.
Try to find out about suppliers’ history before closing a deal, analyze the quantity and quality of products offered, payment terms, and if the delivery process is agile.
As in the dropshipping process, suppliers are responsible for delivery on behalf of your company. Any problem in this regard may compromise your brand image;
How does the product exchange or return process work through dropshipping?
As with the delivery of products to customers, situations of return or exchange of the product by the customer are also suppliers’ responsibility for the logistics process.
In this case, the reseller is only responsible for maintaining contact with the customer and informing him of the delivery, exchange, or return dates.
And in the same way as the delivery process, the return and exchange take the name of your store, although they involve the supplier’s performance!
Find out if dropshipping is worth it for your e-commerce
Understanding what dropshipping is just the starting point for e-commerce wants to know if this is a good selling alternative. It is necessary to thoroughly analyze this concept’s aspects to be sure that its use is beneficial for the business.
On Google Trends, you can see that interest in this model has been growing in Brazil:
Here you will know everything you need to keep an eye on this business opportunity and avoid serious mistakes that can harm your venture.
What is dropshipping
Dropshipping is generally aimed at e-commerces and individual marketplace entrepreneurs. The process consists of receiving service orders (sales) online and forwarding them to the supplier, that is, the dropship partner, who, in turn, sends the product to your customer on behalf of your company.
As a result, there is no need to manipulate or access the product. You only do the intermediate for sale. This process’s profit comes from the difference in price between the amount you advertise on your online store and what your dropshipping partner charges.
How dropshipping works again?
In general, it is a relatively simple process, as shown in the image below:
Step 1: A visitor arrives at your online store and makes a purchase.
Step 2: You receive the sales order and manually or automatically pass that information on to your dropshipping partner.
Step 3: Your partner is responsible for separating orders and sending them directly to your customer.
Benefits of using drop shipping in your business
There are many benefits to using dropshipping to sell on the internet. Below we list the main ones:
Less spending: Without investing in product inventory, you can start a successful dropshipping business with little money.
Few fixed expenses: since you don’t have to deal with the purchase and management of the catalog and inventory, the fixed costs are relatively low. Many successful dropshipping companies worldwide operate out of a home office with a laptop and spend less than $ 100 a month. As they grow, these costs are likely to increase, but they remain low compared to those of a traditional business.
Flexibility: a dropshipping business allows you to operate from virtually anywhere. All you need is an internet connection. As long as you can communicate with suppliers and customers, you can efficiently work and manage your business.
Variety of products: as you do not need to buy items in advance to sell, it is possible to offer a wide variety of products to your customers and expand the catalog as appropriate, as long as your dropshipping supplier has the items in stock.
No double work: With a traditional business, if you receive three times as many orders, this usually requires three times the work. The order processing part will be done with dropshipping suppliers, allowing your business to expand with less expense and less work, so it will be almost the same whether you sell 5 or 500 products.
These benefits make dropshipping a beautiful model for entrepreneurs, but unfortunately, not everything that glitters is gold. All this convenience and flexibility come at a price, as the next topic shows.
Disadvantages of dropshipping
Some of the most notable disadvantages of this business model include:
High competition: one of the biggest challenges is to stand out from the crowd since dropshipping does not allow you to have varieties of exclusive products. You will have a great deal of competition between people who also use this medium for sale.
Low margins: another major disadvantage is the low margin, since normally with dropshipping, your profit will be around 20%. This is because, as tempting as it may be to sell products at exorbitant prices to obtain the maximum profit possible – many entrepreneurs go thirsty to the pot and end up having no success at all – high competition must be taken into account. Having low margins means that you have to sell a significant volume to obtain considerable benefits.
Catalog synchronization (not available): if you have all the products you sell in stock, it is relatively easy to control which items are available or not. But when you’re working with third-party products, although there are ways to improve the synchronization of your store’s catalog with your suppliers, these solutions don’t always work correctly, and providers don’t always have the necessary technology. Because you are entrusting the record to someone, there may be times when a shipping order is passed to dropshipping, and the product has already been sold. The effect of this is very significant, since it ends up reflecting on the delivery time and causing other losses.
Step by step to ensure that dropshipping works perfectly
To stand out from the competition and ensure success with this sales model, you need to follow some indispensable steps. Check out:
Choose products to send via dropshipping once you have chosen a dropshipping partner, check the products offered, and see anything new to deliver to your customers.
- Try products according to the calendar.
Try products that you feel are currently in high demand. For example, during the summer, you can try tops and swimwear for your online store, while in the winter, you can try blouses and hats. The advantage is that you can dare and be eclectic according to the needs of the business.
- Ask your customers what view they have of your company.
After a period of operation, communicate with your customers, and request feedback. Ask them what they think of a product before launching it. Try to ask some questions related to the product after purchase as well—research social networks.
Once you’ve chosen a product to try and you’re all set with the dropshipper of your choice, it’s time to start selling. After publishing products in your store, focus on selling a lot using well- crafted marketing tactics to stand out.
Conclusion on the use of dropshipping
Is using dropshipping the path to instant success in e-commerce? Of course not. Like any successful online store, you should invest time on a website that offers a good experience, as well as marketing and customer service strategies.
But yes, using dropshipping is an easy way to sell without spending a lot on processes.