The internet is a gold mine and it’s up to you to find THE right business model.
More and more, stores are emerging on the web. In particular through influencers who advertise their products through product placements. So, why not reap some of the reward by opening your own dropshipping site?
Before you start, what is dropshipping?
Dropshipping is trending right now. We hear about it everywhere on social networks and online. But for most internet users, this concept remains misunderstood or even unknown.
Dropshipping is based on a 3 part system:
- a supplier that gives the reseller access to their stock
- a reseller/dealer that highlights the supplier’s products on their website
- a customer that buys the products
The mechanism is very simple. When the customer wants to order online, they go through the reseller’s e-commerce site which offers a wide range of products. It is important to note that this reseller does not have the physical stock of the products. When the customer places an order on the reseller’s site, they are actually placing an order with the supplier who is responsible for fulfilling and delivering the order directly to the customer.
In this configuration, the reseller is considered as a service provider since they connect the customer and the supplier. The reseller only takes care of the sale and does not worry about the rest, namely the supply chain and the stock.
The supplier – who takes care of the shipment of products – is considered as subcontractor.
This system is very attractive for the reseller who only has to sell the products. Indeed, the storage and the shipping of the products are the responsibility of the supplier.
In this case, the reseller’s number one priority will be to find a trusted partner who will take over once the customer has placed an order.
In short, the reseller is simply a service provider whose sole mission is to sell the supplier’s product to recover a margin.
Dropshipping, what are the advantages?
If you are new to the e-commerce industry, dropshipping can turn out to be a very lucrative business.
The main advantage of this business model is that it doesn’t require the initial capital investment usually required to buy the stock that is sold in a traditional brick and mortar retail space. Neither does the reseller need to worry about unsold stock since by definition dropshipping they have none.
It therefore becomes possible and accessible to launch a business at a reduced cost, the ideal way to launch into entrepreneurial life.
Regarding earnings, before setting up this system, the reseller and the supplier first agree on a fixed amount to be shared only if a product is sold. There is therefore no additional cost to the reseller.
Yet another advantage is that an e-commerce site can offer a rich catalog of products right from the start without spending a lot of time and effort. That makes it possible to concentrate 100% on the core business: the sale of products.
The Flaws of this System
The main problem is finding a supplier you can trust in your industry since the reseller will have to present a solid case for the supplier to accept this system which is undoubtedly more advantageous for the reseller than for the supplier.
The dropshipping industry is largely powered by a network of Chinese suppliers and wholesalers. The number of Chinese dropshipping companies has exploded on the last years.
Therefore, close and regular communication must be established between the two parties. Indeed, the reseller must frequently check the inventory status of the suppliers in order to honor all sales made on the reseller’s e-commerce site.
This system has existed for several years and is used by most known platforms such as Amazon, Ebay, Priceminister, etc.
Our firm has developed particular expertise in dropshipping. Please do not hesitate to contact our dropshipping specialists for more information.