Monday, September 27, 2021

What Is Dropshipping And What Are Its Advantages?

If something is clear is that today we only need a computer in front of us to buy practically anything and in an endless number of stores of all possible types. Many of these stores use the dropshipping technique, which is a form of triangulation of orders and shipments, something that is very fashionable lately. Let's see what it is and what advantages this way of selling has.

Internet sales have become in a few years the preferred method of purchase for a good number of people, with the consequent increase of online stores for all tastes.

Many of these stores would not be able to carry out their activity if it were not for the dropshipping system, which we are going to talk about right now, since it is a way to optimize everything that is the purchase, the warehouse, the shipping and what the customer receives.

The percentage of online stores that opt for this system is quite considerable and there are more and more, as well as suppliers that offer this type of system. Let's see what it is and how it works.

Dropshipping: let's learn what it is

Dropshipping is a system that online stores have to sell the products they have advertised.

This means that when a customer places an order, the store requests it directly to a supplier, who is in charge of sending the products to the customer, always with the identification of the store where it was purchased.

This means that the people who have registered the store do not have to invest in having the products they are offering, since it is the supplier who has them in stock.

When someone opts for this system to open an online store, they should know that the margin between what the supplier charges and the price to the customer is lower than if the stock were their own. This is something obvious, since the prices at which you must buy the material are higher, since they must include not only the stay in the warehouse, but the shipping costs on behalf of the store itself.

This means considerable savings, since it is not necessary to invest in products in advance, nor to have a warehouse. By not investing, you don't even have to pay for shipping costs, since they are paid by the supplier. 

When someone buys from the store, it is the supplier who is in charge of handling the order, placing it where it needs to be shipped and contacting the transport company to pick it up and deliver it to the customer. The convenience for the store is really high and in most cases, the customer will receive the package as if it had been sent by the e-commerce itself.

Something to keep in mind is that this system involves all the legal duties that exist in Spain for any store, i.e., offer warranty on products, be prepared for possible returns and even be registered as autonomous at least.

Regarding returns and warranty, many dropshipping providers take care of it, but, as is evident, it is not at zero cost, but the margin between prices would drop slightly to cover this aspect.

This system does not affect the customer at all, who the vast majority of the time is completely unaware that the store works this way. People simply buy what they want and over several days they receive it at home on behalf of the store in question, so their experience will be the same as shopping anywhere else online.

Advantages and disadvantages of dropshipping

If someone were to ask us if this is the best way to open an online store, we should always put everything in context. 

It's not all advantages, but the best thing about this way of selling is the following, in case you are planning to open a dropshipping store:

  • Less money in investment: obviously if we do not want to invest a lot of money, this way is the only one that allows you to do it, because at the time when you have to have a warehouse for the products, the investment skyrockets. 
  • You buy when you already have the money: this is another clear advantage of dropshipping and is that you do not buy anything from the supplier until the customer has not paid you, which means that in this case you will not have to invest anything.
  • Profits at the moment: you will earn money at the moment you sell. That is to say, since there is no investment in products, when you sell something, the profit will be immediate, since you will keep the difference between what it has cost the customer and what it really costs you to buy it from the supplier.
  • Much larger catalog: as is normal, the catalog will be much larger than if you had to buy the products yourself in advance. The stock that a supplier has is much larger than a normal store could have.
  • Control it from anywhere: you can continue to have the store wherever you are, that is, you will not have to be present in the same place, since you can take orders from wherever you want because you do not have to handle anything.

But not all are advantages, as there are also disadvantages that we can consider and that occur in dropshipping. If you are interested in opening a dropshipping store, you must be clear about the disadvantages as well:

  • Less profit margin: what you earn on any product is the difference between the price at which you sell it and what it costs you. With dropshipping this margin is lower, since the supplier's price will include the fact of "renting his warehouse", shipping and even sending the order on behalf of your store.
  • Dependence: in this case you depend a lot on the supplier and that can be a "double-edged sword", because if the supplier makes a mistake, you will be the one who made the mistake in front of the customer. That is why it is so important to choose our supplier(s) well.
  • Warranty and returns: it is clear that your store must be the one to provide the warranty and manage the returns, something that can mean an expense that you must take into account. You can reach an agreement with the supplier so that these two parameters are managed by him, but this will mean that your profit margin will be reduced, as is normal.
  • You need some investment: for the stock you do not need investment and then the purchases you make when you have the money, but you must be clear that people must know you and for that you have to invest in advertising and there may be the biggest expense (in addition to everything related to the freelancer) you have to do.

What possibilities are there?

Regarding dropshipping providers there are many and it is a matter of searching the Internet, as each business niche has its own, there are some that are dedicated to a little bit of everything like BigBuy.

There are also websites specialized in the creation of online stores such as Shopìfy where they even offer the possibility of having a supplier for the page you are about to create. Something similar to what we have with Oberlo, a website where everything is automated and allows you to enter the website, choose products and add them to the online store in a very simple way.

After knowing what it is, how it works and the advantages and disadvantages of dropshipping, it is time for everyone to decide if this is the way that best suits their needs to open an online store. If the answer is yes, we can only advise you to always read any type of contract you are going to sign very carefully. This way you will not have any surprises.

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