We explain what is he dropshipping, what advantages and disadvantages does it have or how can we differentiate this sales system from others online.
What is
Dropshipping is a form of commerce or online store that contacts the supplier directly with the buyer, without the stock passing through the store. Let’s take as an example that you are an online carcass store. A customer buys a carcass from you for 10 euros, you send the order or order to the supplier and pay what is worth in bulk (in this case, for example, about five euros) and it is the supplier himself that sends the product directly to the customer. You get to earn money for the difference in price at which you sell and at which you buy and You save having stock or managing orders that will reach the end customer.
Customers do not have to know that a store in question works with dropshipping or not, they simply buy the product and you take care of the necessary paperwork. The merchant and owner of the store never manipulates the order, does not make the shipments nor does it have to have physical stock. In addition, it has the great advantage that you do not have to accumulate any product that you are not going to output. You do not invest in orders that you do not know if you are going to sell but you order the product itself once you have received the request.
You have no risk when it comes to “keeping” what you have not sold. You simply manage the orders received And you entrust them to the supplier who will be in charge of preparing the package, talking to the transport company, and sending it to the final recipient. It is an option that allows us to start a store with less fixed or maintenance costs and that can be achieved through online store platforms such as Shopify, for example.
Is it the same as Amazon or Aliexpress? Not in general. In these online stores there are small sellers who are in charge of uploading products to the Marketplace or showcase, but they are, for the most part, the ones who manage the shipments, the stock.
Although it is a recommended option for buying or selling online, we must bear in mind that not “just anyone” should decide to use this method to earn money. There are many influencers who promise that you will be able to earn thousands of euros in a few days but selling products online requires having a series of legal requirements, registering as a freelancer and you must respond to returns or the law that in Spain requires a guarantee of two years on any product sold.
Difference with affiliate programs
In affiliate programs you are not a store or business, they do not buy from you. You do receive a percentage but you are not the one who should come forward when making a claim with the client. That is, dropshipping implies that they buy from you directly and You must contact the provider so that it reaches that end user, but you are responsible in case of returns or in case of warranty. But affiliate programs you have no responsibility, Instead, you simply put a link available to users who go to the store to buy it and receive a commission in exchange. It is usually common in Amazon, for example, where a code is added at the end of the link so that that person receives a percentage for having led the customer to the sale. But if the customer returns the product or has a problem, you have nothing to do with it, it is a communication between store-buyer that you don’t worry about.
Advantages of affiliation over this method? You simply have to put a link in social networks that makes you receive money if someone buys it from there. Another advantage is that we do not have to have an online store or worry. The main drawback compared to dropshipping is that we will earn much less money if we simply want to use affiliate links. Unless you are a great influencer with thousands and millions of followers who jump into buy anything than links on social networks like Instagram.
Advantages and disadvantages
Is this type of online store better or worse? It depends. It has advantages and disadvantages that we have explained in the previous paragraphs but that we summarize here in some points that you must take into account.
Some of the advantages are:
You don’t have to have a large capital to make this type of online sales because you are not going to buy a large stock. If you have a physical bookstore, for example, you need to have thousands and thousands of books in which to spend an initial investment without knowing if you will be able to have a return or not. If you use dropshipping online commerce, you do not have to have any initial stock or spend this investment since you only buy what you know is sold. That is, you buy it when you have already sold it.
- Larger or diverse catalog
You don’t have to have the products so you can try different “types” in case something doesn’t work for you. Too you can offer much more as long as you have the corresponding providers that are going to provide you with them.
Even if you have to have an online store always or almost always open, you must not be there. That is, you can have a flexible location if you are going to travel for two months or on vacation because you will not have to prepare the orders but only give the order to the supplier to manage it without the need for your intervention.
But there are also some drawbacks:
- Problems with suppliers
You do not depend only on you but you also depend on the provider 100% and that can be a problem if you have not chosen the right one or it does not respond well.
You will have less margin using this online sales method than if you bet on creating a store or ecommerce from scratch. You will have to keep in mind that stock management and shipping is something that will affect the price you pay.
- Guarantees and returns
You have to take over the guarantees, It is not that you simply put the image and you forget until you receive the money. It is a store and a business, which requires investment in time and you must respond. Another frequent problem is that of returns: legally a two-year warranty is offered and you are responsible for what you will have to respond to in the event of a return. A frequent problem that some entrepreneurs complain about is that the quality that the buyer receives is not in accordance with the price they have paid and that leads to continuous returns of all kinds of products.
How do you know which stores do it?
You cannot know it unless they specify it themselves on their website or there is some identification on the package you receive but for consumer purposes they must act in the same way as any other store and they must respond in case of problems with the shipment, damaged products or a breakdown.
Generally there are many stores that we buy Chinese mobile devices that do dropshipping. That is, they do not order the phone from Chinuntil you have requested it from Spain. They take care of the guarantee and comply with the national regulations but they do not have it in stock. The advantage they have is that they can offer a lower price since they do not have to bear the costs of a large infrastructure (lower costs and, therefore, more margin) and that they can offer a greater variety of products in the catalog
How to sell using dropshipping
Some websites specialized in creating online stores, such as Shopify, already have a dropshipping service and offer users the possibility of find products and distributors automatically no need to search one by one, via Oberlo. Oberlo is a platform that is designed to add certain items to your catalog without having to have the aforementioned inventory. You have a showcase and place the order to Oberlo when you receive a purchase. Automatically pack and ship the products to the final recipient.
You can manage everything from some websites like Shopify Although it is not the only one and Amazon also has the possibility of selling using dropshipping in its Marketplace, with the advantage of having visibility in a large online store without having to start from scratch with yours. In return, you have to pay a seller subscription and commissions.