Dropshipping is a form of business organization in which buyers receive goods directly from suppliers, bypassing the warehouse. Basically, this form of sale is used when organizing online stores. The only intermediary between the manufacturer and the buyer is the owner of the online store. The goods are shipped immediately after payment is made directly from the supplier. All income is made up of the difference between the cost of the goods from the manufacturer and the money paid by the buyer.
Dropshipping Basis
The literal translation of the phrase Dropship from English is drop shipping. Direct deliveries from the manufacturer to the buyer have a lot of advantages, the main of which is the absence of such an expensive thing as a warehouse.
Dropshipping is based on the idea of creating your own online store or online auction. But instead of thinking about stocks and their placement in the warehouse, you just need to conclude contracts with one or more suppliers (manufacturers or wholesalers).
Finding a supplier willing to work with dropshippers is not that difficult. Nowadays, more and more industrialists and wholesalers are focusing on direct supplies to the consumer through an intermediary. The fact is that many wholesalers and industrialists benefit from working with dropshippers in many ways. First, there is no need to advertise your product. Secondly, intermediaries do not waste time on inquiries (delivery methods, payment options, prices, etc.). On the contrary, the dropshipper themselves answer the annoying questions of the buyers.
Choosing the right supplier is also easy: just visit their websites and choose the right product for your business. You can apply for cooperation via the Internet.
Creation of a website for an online store, its promotion to the top and technical support functions can be entrusted to specialized firms or individual programmers. But it is better for an entrepreneur to fill goods with goods on his own, supplementing the goods with an annotation.
The choice of pricing policy also remains with the intermediary. At first, to win customers, prices can be made slightly lower than those of competitors. Then - focus on the average price of competitors.
In the dropshipping business, the supplier is responsible for packaging and shipping the goods to the final recipient. But the buyer will still ask the owner of the online store about the timing of receipt of the goods, therefore, to track the delivery, the intermediary uses the tracking service: each product is assigned a unique identification number that allows you to track the path of the goods at all stages of delivery. This number is often communicated to the customer so that he can see what is with the goods at any time of the day and when he arrives.
Dropshipping scheme
The scheme is simple. It is known that not all large manufacturers have a desire to engage in retail sales of their goods, preferring to delegate the functions of implementation to partners. In a direct delivery scheme, such a partner is an online store or an online auction. He provides a "showcase" at his own expense, carries out marketing research, promotes products on the market, accepts orders and formalizes transactions.
After the intermediary accepts payment for the goods from the buyer, the data on the orders made and the payment for them immediately goes to the manufacturer. The latter assumes the responsibility to pack the goods properly and deliver them to the specified address (to the buyer). Alternatively, delivery can be performed on behalf of the owner of the online store. At the same time, the store owner does not keep stocks, and therefore does not need a warehouse.
Benefits of running a dropshipping business
Most of the advantages of this type of business are directly related to the absence of a wholesale link and any kind of warehouse:
- A direct delivery business can be set up with a minimum of start-up capital. Some money will still have to be invested, but these amounts will be relatively small.
- Minimal financial risks for the intermediary: he sends money for paying for the goods to the manufacturer only after he receives the money from the buyer.
- The minimum start-up capital means freedom from lenders and investors.
- There is no need to keep a warehouse, take care of inventory and leftovers, have a delivery service, office and office staff.
- The supplier assumes all responsibility for the delivery of the goods to the end consumer.
- An intermediary to expand the range and reduce prices can easily start cooperation with several suppliers (if this is not prohibited by the contract). If one supplier does not meet expectations, it can be replaced easily and quickly.
- If there is an agreement that the supplier will deliver on behalf of the reseller, he (the reseller) can easily create and promote his own brand.
- The intermediary is not tied to any product category. A complete change of assortment (from electronics, for example, to perfumery) is just a matter of finding new suppliers and replacing goods on the site.
Disadvantages of a dropshipping business
Some disadvantages of dropshipping follow from the advantages:
- Lack of inventory can lead to a situation where the supplier does not have the goods ordered by the buyer at the moment. Naturally, in most cases, such a client will simply leave to look for what he needs on another site, and the intermediary will lose him as a client.
- In the event of any delays or difficulties during delivery, the intermediary will be responsible for them. And there can be many such cases: a delay in the work of the post office, difficulties at customs, and much more.
- In Russia, many customers of online stores like to have the goods delivered on the day of order. If this is not possible, they simply leave to look for a product on another site. The problem is that if the supplier and the buyer are located in different constituent entities of the Russian Federation, it is absolutely impossible to organize delivery on the day of the order.
- The intermediary is entirely dependent on the supplier in the following matters: delivery speed, product quality. Therefore, you should carefully check the reputation, integrity and reliability of the manufacturer. And at the same time think over a mechanism for resolving conflicts with the buyer.
- It is worth noting that the buyer not least of all pays attention to the cost of delivery, and in our country it very much depends on the distance between the buyer and the manufacturer.
- Difficulty working with customers. The buyer is usually very picky and finicky. And he likes to ask a wide variety of questions. Moreover, according to statistics, out of 100% of those interested, only 20-30% end up buying something.
However, with the competent and responsible actions of the intermediary, with the efficient work of the supplier and in the presence of a well-functioning sales scheme, all these risks can be reduced to almost zero.
Popular payment methods
If a reseller promotes a product through an eBay online auction, in this case, there will be only one payment method - through the PayPal payment system.
There are many more payment options on the RusDropshipping platform in our country. This attracts potential buyers and retains existing ones. Payment methods include:
- payment by bank transfers (from card to card, from account to account and others);
- payment by electronic money (QIWI, Yandex. Money, WebMoney, Bitcoin and others);
- Western Union transfers.
The more payment options are provided to the buyer, the higher the likelihood that he will buy the product. That is why more and more new payment options have appeared recently: with cryptocurrencies Bitcoin, Ethereum and others. But, despite this, more than 50% of Russian buyers still prefer to pay in cash upon receipt of the purchase.
Prospects for dropshipping in Russia
It should be noted once again that the success of this type of business largely depends on the reliability and conscientiousness of the supplier. As in other countries, in Russia there are frequent situations in which an intermediary is faced with the manufacturer's unreliability, and even with outright fraud. Considering the novelty of this type of business, the solution of many non-standard situations has not been worked out.
Dropshipping in our country is not developing as intensively as in other countries. There are several reasons for this:
- the novelty of this type of business, the lack of development of all the nuances and non-standard situations;
- a large number of unscrupulous suppliers, slovens who are negligent in matters of delivery of goods;
- distrust of Russian customers to a new type of sale of goods;
- imperfection of delivery mechanisms;
- long distances between cities and regions, making it impossible to deliver goods on the day of purchase;
- the success of an online store largely depends on its promotion to the top of search engines, and with this many have problems.
