“DropShipping” Websites & Companies: A Step-by-Step Guide
It is one of the many anglicisms we use in our daily lives, and its literal meaning would be a bit “dropping the package.” Which goes very well with the fairly simple concept of: you put on sale the products of a wholesaler and he is the one who sends the packages (because it is he who stores them).
According to Statista, the five largest countries with highest ecommerce and dropshipping market share in terms of revenue in 2018 were:
|China||US $636.09 billion|
|USA||US $504.58 billion|
|UK||US $86.45 billion|
|Japan||US $81.7 billion|
|Germany||US $70.35 billion|
Moreover, according to Magenticians.com, following are the top 10 ecommerce companies of 2019:
|1. Amazon||6. Rakuten|
|2. Alibaba||7. Home Depot|
|3. eBay||8. Flipkart|
|4. Jingdong||9. Zalando|
|5. Zappos||10. Otto|
That is, Dropshipping is the sale of products by catalog without investment and retail , in which the retailer is responsible for making the sale, without it being who owns the product (that is, makes sale without stock . , the retailer reaches an agreement with the wholesale supplier of the products for sale (which is called Dropshipper (it is the one that “drops the package”), so that it is he who is responsible for sending the orders to the final customer .
That is why we say that the retailer does not need to store the products for sale, and here we have the first advantage of dropshipping: the saving of the storage infrastructure . In addition, the retailer buys the products from the manufacturer at a lower price than he subsequently sells them, which entails another advantage: profit making >.
That is, if as a retailer you decide to create a Dropshipping store for your online business, you will be an intermediary of the Dropshipper (wholesale supplier) and your fundamental task is to achieve the sale.
Dropshipping in Spain has become an interesting alternative for those people who want to create an online store and do not have enough financial support, since it is a business with hardly any investment Dropshipping is a risk-free sales service
Difference Between Dropshipping and Affiliate Programs
This is a question that can arise often, since in both the sales that are made are as an intermediary. But they are not the same at all.
The dropshipping is selling products by catalog without investment and without having them in stock. You do it from your own online store or from a platform. And you set the price of the product, based on the margins you want to reach. You can also start from scratch, like any other business.
Affiliate programs consist of promoting a third-party product or service, through a link that you put on your website or blog and from which you access the other website or trade. Every time a sale is made, you take the commission agreed with that person or company. If you already have a known website and / or have many visits, the better, because you have more chances to get more sales.
Advantages of Dropshipping
Collecting a little of what was said in the previous point, we can affirm that the advantages of Dropshipping stores are:
There is no risk of economic losses , since as we said, the investment is minimal. You will always have a profit margin (big or small is another matter, of course)
It is not necessary to hire personnel to store the products or manage them . All these tasks are the responsibility of the supplier. This will take away many headaches, and above all, it will save you in personnel costs. That is why we say that Dropshipping is a good technique for those who cannot make a large investment.
Since you don’t have to worry about stock management or orders, you can take advantage of all your time to develop effective sales tactics and focus more on the business itself.
Like any online business, it is easily scalable , but the case of Dropshipping especially is even more so, since it is very easy to expand the catalog. Also, since you don’t take risks, you can try different products and see which ones work and which don’t.
Disadvantages of Dropshipping
Obviously, there is nothing perfect in this world, so we also have to put on the table the disadvantages that you must take into account when setting up a Dropshipping store.
Lower profit margin on sales. As we said before, of course you have earnings. Some may be in the form of a commission, so the margin will be less than if you buy and then sell directly. But beware, because if it is a very competitive market and you decide the price, you will see that in order to get a sale you will have to lower it, and therefore, reducing your margin.
You do not have total control of the products and their shipments. If they are delayed or there are incidents, facing the dissatisfied or angry customer, you are responsible. To this we can add that if you work with more than one wholesaler, your customer can ask (without knowing it) products from different suppliers, which means that your order can arrive in parts. Which is quite annoying, especially if you have no margin of delivery time, because this means being more than one day pending the arrival of the courier. Not to mention that you will have to pay two shipping costs.
Even if you save on warehouse and logistics costs, just like you are selling that wholesaler’s products, there may be another 548785 people as well. You’ll have to work very well – that is, invest – in the design of your website, usability, and above all, the SEO of your online store. Because you want to get over your competitors, right? Actually, working SEO and the usability of your website you will always have to do, whatever your business. But obviously, if it is a more differential and unique or own product (or service), it will be easier for you.
If the dropshipper provides you with the online sales platform, you will almost certainly not be able to edit files to help the positioning (SEO) of your company, since you do NOT have access to these files or their server. I mean, it doesn’t let you do anything that helps you sell more. Therefore, before saying yes, ask them to explain to you how SEO works.
And of course, keep in mind that as in any other business, you will have to register as a freelancer or create a company and all this entails unavoidable monthly and other establishment expenses.
Ques 1. Who Uses Dropshipping?
Basically, Dropshipping is chosen by two types of users and for two different things.
Less risky entrepreneurs . Those who hire a service through which the provider provides them with the tools for sale: online store, advertising banners, etc.
Daring entrepreneurs . They risk a little more by hiring the necessary services themselves and depending solely on the supplier in terms of products. In this case the investment is greater, but also the control. They are usually people who already have an ecommerce and want to increase their product offer without risking buying stock.
Ques 2. How to do Dropshipping?
We give you 8 tips to create a Dropshipping online store. Do not get a cat for a hare, and as always when you start a business, go with a thousand eyes on everything. So get to work: Dropshipping, how to start?
#1. Choose your product and your niche well
That is, study the competition. Research online and find out how many stores are already selling that product that you found so interesting. Because if everyone already sells it, the competition will be brutal and the benefit rather scarce.
Tip: You better choose a less demanded product and start to exploit that niche.
#2. Beware of the Dropshipping provider
Before starting to work with the supplier, make sure that it is reliable, provide you with all the information you need about the products, that there is open communication for possible future incidents … and as for logistics, we tell you what you have to have mainly consider:
Dropshipper location: If you are from your country, better, so you avoid customs problems.
How does the packaging. Do not include your own logos or brand.
Shipment management: If you include invoice in them and if the returns are at your expense or not.
Tip: Do not believe everything the dropshipper tells you, find out for yourself.
#3. Negotiate with the dropshipper
It is not only a matter of trying to improve the prices of the products and thus increase the sales margins that you can get from them, but also to negotiate if possible the delivery times of the products to customers. With all the information they give you, make sure you are worth the investment.
Tip: Keep the accounts clear. This is fundamental.
#4. Attention to the clauses you sign
Above all, be careful with the responsibility of the returns we said before. With most of the suppliers, it is you who assumes them, so it is an expense that you have to see if it compensates you or not.
Tip: It’s quite obvious, isn’t it? Always ask if there are actions or expenses that are going to run on your own!
#5. Study the facilities well
Some dropshippers offer facilities in the form of payment of the products that you have bought them to sell, or even finance the platform (the non-editable online store) or offer you advantages of some kind to start your dropshipping store. Obviously, your interest is that you sell and find them profitable, so keep in mind that the facilities will only last as long as you sell. Which is not always so easy.
Tip: Study the profitability of the product you want to sell before anything else.
#6. The SEO of your Dropshipping store
It is usually very difficult to position a Dropshipping store well, because all other stores will have the same descriptions on their products, which involves duplicate content. If you know some SEO, even if it is not enough, surely you are tired of hearing that duplicate content, for Google, is disastrous. But it is not only for that reason, it is that if you differ from others, it will be easier to stand out and therefore sell.
Tip: Although it is laborious, devote time and resources to modify the descriptions and titles of the products, so that they are different from those of your competition. Start at least for those that interest you most.
Do not get into this if you are not going to be able to invest in online marketing. He who does not invest does not win. This is so and as much as you have, just by making an online store you will not increase conversions. You have to work it.
Tip: Create your own community, move on social networks, work your email marketing, invest in advertising … come on, as with any other online business.
#8. Make sure your customer is satisfied
Since almost certainly the entire after-sales process is not going to depend on you, if not the supplier or dropshipper, be sure to contact the customer once you have received your shipment and ask if everything went well. In this way, in addition, you will be loyalty.
Tip: It is best that you send an email or even a message, where the client can easily assess the entire process, as well as leave comments.
Choose Right Platform To Do Dropshipping
If you opt for your own online store , of course, Prestashop is one of the platforms on which you can set up your Dropshipping store. You can also choose Magento or Shopify .
After all we have told you, we believe the conclusion is clear. Dropshipping can be ideal as a complement to an existing business, or as a “test bench”: try selling a product without risking capital by not investing in it. And if it works, you buy stock and sell it directly.
But we don’t think it’s a good idea to base a whole business on this sales model. The margins can be very small, and the wholesaler cannot (nor wants to) take care of thousands of retailers that take a few dozen sales a month. Which is logical. So you can find that part of the catalog is dropped.