Dropshipping for dummies

Discover in this article entitled “dropshipping for dummies”, everything you need to know about this new economic model which is all the rage in the world of online commerce. Indeed, dropshipping, which could be translated into French by direct delivery, is an online activity that generates billions of euros in transactions each year around the world.

Faced with the rise of this economic model, many dropshipping platforms have emerged in recent years. Shopify is one of the best known in the world, with a 13% market share and operating on the SaaS (Software as a Service) model. Three subscription levels are available, basic, standard and advanced. Costing respectively $ 29 per month + 2% CA HT, $ 79 per month + 1% of CA HT, finally the advanced version comes to $ 299 per month + 0.5% of CA HT.

What are the specificities of Dropshipping?

Dropshipping, unlike traditional online sales activities , eliminates the need for inventory management, as well as the logistics of shipping orders. This type of trade is in fact a trade without stock. The dropshipper has no stock. He only buys products when he has already sold them to his customers. This is where all the difference is. While a traditional e-merchant buys their products, stores them, and then resells them to their customers, the dropshipper sells before buying.

Therefore, this new online sales method is perfect for starting a store on the Internet . However, once the online store reaches a certain critical mass, dropshipping can become a drag, causing many complications, or even becoming a risk factor. We will come back in more detail to the advantages and disadvantages of this economic model. Now let’s see how this new way of selling products on the Internet works.

How Dropshipping Works

How dropshipping works is relatively simple. It is based on a three-party system, in which the customer, who is the end consumer, will place an order in the online store of the e-merchant, who himself will transmit the order form to his supplier. Once the order has been received, the wholesaler will then ensure delivery to the end consumer, and stock management. To summarize, dropshipping unlike classic e-commerce. Allows the e-merchant to sell their products on Marketplaces such as Amazon, AliExpress, RueDuCommerce, eBay etc.

No model is perfect, and this new way of doing business online is no exception. Since in dropshipping, customers pay for orders directly with the dropshipper. The online seller then pays their supplier, which inevitably cuts into their margins. An aspect that should be taken into account when establishing the price of your products. However, if the reduction in margins is real, it is generally offset by the reduction in charges allowed by dropshipping.

Benefits of direct delivery

The advantage of dropshipping is immediately obvious, in terms of economy and risk reduction. Because you probably already know, as in any economic activity, embarking on online sales involves a significant financial risk. Particularly with regard to initial investments, such as purchasing packaging, building up stock, logistics, to name a few.

In the traditional online sales model, if the online store is not immediately profitable, then its owner will have to deal with the accumulation of operating costs, while his stock stagnates and depreciates. In dropshipping, all these problems no longer exist, the merchant cannot find himself stuck with a stock that will have to be got rid of, even if it means selling it at cost price.

Dropshipping also makes it possible to test new markets at a lower cost without having to build up a stock. By choosing this business model, the online seller can then focus on strategic thinking, marketing, and lead generation. Because order processing and inventory management is a very time-consuming activity. The time and money saved can also be used to expand the product catalog. As a reminder, there is a strong correlation between catalog size, product choice and sales conversions. Dropshipping allows you to overcome these constraints, especially if your business is growing at high speed.

Disadvantages of the Dropshipping Model

Now that you know what are the advantages of this new way of selling on the web. Let’s find out together what are the disadvantages of dropshipping. The dropshipping has the defects of his qualities, that is to say that there is strong competition, as barriers to entry are very low. Since it is a way of doing business that is accessible to almost everyone, the competition is ruthless.

The other disadvantage of dropshipping is the lack of control over the quality of the products and packaging. Here again, this model has the defects of its qualities, since the delivery is based on a third party. Therefore, the dropshipper has no control over this aspect of the business. Also, if your wholesaler sells products of questionable quality. So the brand image of your store may take a hit. However, to qualify this aspect of things, a drastic selection of suppliers will make it possible to avoid this pitfall. We advise you before you start with a supplier or a wholesaler to test its products, by sending you samples.

Finally, the little customization available for packaging is one of the last negative points of this tripartite system. Since it is the dropshipper who takes care of order preparation, packaging and shipping. In a way, the merchant also subcontracts his customer relationship. However, more and more wholesalers offer the possibility of customizing the packaging to a certain extent.

How to choose your suppliers

Now that you know more about dropshipping, it’s time to decide if dropshipping is right for you. To tell the truth, it all depends on your needs, your goals, and your preferences. If you want to get started in your e-commerce activity, without taking too many risks. Then, a dropshipping store is an ideal solution for you. This is also valid if you already have a small online sales website, and you want to boost your business in the short term.

On the other hand, if your business requires total control over the quality of the products, or your brand image. So, it is better for you to turn to alternatives to dropshipping. For this it is preferable to turn to a 3PL subcontractor. This will allow you to manage the personalization of your packages. If you have enough space to store products and manage their delivery yourself. Then software like ShipStation will not only allow you to process orders and shipments, but also to create and print personalized labels, etc.

Finding the right supplier is the next step, a choice that will be largely determined by the type of product sold. Thus, today there are many wholesalers who can sell all types of products, some specialize in household appliances, others in jewelry, or even high-tech equipment. Regardless, it is imperative to do serious research to identify the best supplier based on the market in which you want to position.

Conclusions and Tips for Beginner Dropshipper

In conclusion, we strongly advise you to compare the prices well, in order to better calculate your margin. But also to test the quality of the products to avoid disappointments and negative opinions from your customers. To be sure, don’t hesitate to ask for product samples to ensure their quality.

The quality of the insurance provided is undoubtedly one of the most important criteria to take into account in choosing a supplier. To make your choice ask yourself the following questions: is there an insurance on the orders, what happens in case of loss of package, what is the return policy of the wholesaler, he has- Does it have a protection system against bank fraud, does it have certifications, what is the responsiveness of its customer support, without forgetting of course the delivery times.

Before you start, remember that dropshipping is a really attractive option if you want to get into the e-commerce business. On the one hand, because this economic model is adaptable to all activities regardless of their size and longevity. But also and above all, because it allows you to start an online store while taking a minimum of financial risk, or to experiment and conquer new niches with new products or concepts. Finally, the time and money saved can be invested in SEO, web marketing, and visitor acquisition.