The term dropshipping comes from the word drop, which means “drop” and shipping, which means shipping. This model refers to a way to sell online without needing your own inventory. That is, the entrepreneur uses the stock of third parties.
In this modality, the site is used as an online showcase of national and international products. The logistics and costs of delivery of the items are the responsibility of the supplier.
Despite the ease, dropshipping has some disadvantages, such as the lack of control and tracking with respect to the shipment of goods, low profitability and great competition in the same sector. This makes the profit margin small, as it is common to work with commissions on each product sold in this model.
In addition, you may experience errors with respect to quantities in stock. You must be aware not to keep sold out products being advertised.
How does Dropshipping work?
In dropshipping, the customer accesses a company’s website, chooses the products and makes the purchase there. As soon as the payment is confirmed, the order is transferred to one of the partner suppliers who, in this case, has in hand the stock of the products purchased by that customer.
In this way, the partner supplier makes the separation and packs the products that will be sent by a carrier or by the Post Office. As soon as the customer receives your order in hand, you can evaluate the purchase on the website you have had contact.
For customers, this whole process is not shown and often it does not even have contact with the product supplier.
In other examples, such as those we mention in this text, it is possible to know that the site itself intermediates between those who have access to the product and who wants to buy it.
This transparency policy is critical for the customer to feel confident in the service. In addition, it is necessary to build a good brand reputation for customers to see value on that site and that suppliers feel safe selling there.
Now that you understand how the dropshipping flow works, generally speaking, let’s know the biggest advantages and disadvantages of this option for your business?
Differences between Dropshipping, Marketplace and E-commerce
Many people confuse dropshipping with other digital business models.
Dropshipping is nothing more than a way to sell online without worrying about inventory or means of payment. The supplier delivers the products directly to the customers, and thus the entrepreneur does not need to deal with logistics. In this case, you must have a website or online store. However, the vendor does not appear to the end customer at the time of purchase.
E-commerce or online store involve the need for their own stock. It is necessary to develop a website and register all its products, in addition to having to deal with the processes of delivery logistics. The operation is very similar to a physical store, but in the virtual environment.
Finally, the marketplace is like a virtual mall. Several different suppliers are gathered together. You, as an entrepreneur, can sell your own products in marketplaces already in the market. Or, you can create your own marketplace, which is a highly scalable business.
When you create a marketplace, you also don’t have to deal with inventory or logistics. Its role is just to mediate the business, and attract customers and suppliers to the platform. This allows for high long-term profitability and large scalability. This means that it is not necessary to increase business costs to increase the number of customers.
In short, in dropshipping, all responsibility for product delivery, quality, etc. remains the entrepreneur’ responsibility. In the marketplace, the platform administrator is only an intermediary, being such responsibilities directly from the seller / advertiser.
How to work with Dropshipping?
If you thought working with dropshipping can be interesting, you need to remember a few things when you start.
Define your work niche and choose trusted suppliers. This can andcan make fraud and people who act in bad faith. Do careful screening, check that store’s reputation, and have a clear policy in cases of breach of trust.
Create a website! If you have knowledge in programming, you can develop your own website. Or you can hire programmers for this activity.
In addition, it is important to offer customers only what can be delivered. Make sure that the inventory is being managed well, since what is actually appearing is the hallmark of your company.
Alwayskeep the delivery, focus on communication and relationship and remember that the return of goods is a possibility
Dropshipping is a new way of doing online business, which requires no major investments or inventory. Like any model, it has advantages and disadvantages. The way to create a marketplace, for example, offers more profitability and security for the entrepreneur.