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You don't have to own the products to sell them. The logistics model based on dropshipping allows you to do so.
You don't have to own the products to sell them. The logistics model based on dropshipping allows you to do so.
Dropshipping is an online sales model in which the storage and shipping of products is transferred to a supplier or wholesaler. An order placed in an e-store is routed to a wholesaler, where it is completed and shipped to the customer. The orderer usually does not even know that the shipment has not left the e-store where he made the purchase. Dropshipping works especially well for fledgling stores and those that want to grow at a fast pace. It is also used by stores selling bulky goods, the storage of which would require adequate warehouse space.
Don't waste your time with dispatches
Such a model solves the problem of stores that do not have the space to store products and those that would like to expand their assortment, but cannot afford a warehouse and hire people to handle it. - In dropshipping lies the whole essence of e-commerce. A store that uses a wholesaler operates almost exclusively virtually and focuses on increasing sales. The actual handling of the order takes place outside the e-store, notes Tomasz Tybon, director of sales and marketing at Dreamcommerce, a provider of software for online stores Shoper. By shifting distribution to a partner, it gives the seller time to deal with other aspects of the business he is running: marketing, sales management, customer service. In many cases, it also allows the seller to run several e-shops or combine online sales with other paid work.
Lower barrier to entry
An online store working with a dropshipping partner makes a profit on the difference between the wholesale price and the retail price. Importantly, in dropshipping, the store pays the wholesaler for the product only after the customer has paid for the order. This eliminates two of the most common problems of online sellers - the need to invest in goods before generating sales revenue and the backlog of unsaleable products on the shelves. As a result, a novice seller has a lower barrier to entry into e-commerce and does not freeze funds at the very start.
Working with wholesalers also gives small entrepreneurs a chance to sell products that, due to their limited reach, they could not order directly from a manufacturer or distributor.
Dropshipping on the rise
In the United States, an estimated one-third of online stores operate on a dropshipping basis. This model is used, among others, for some orders on Amazon and the Zappos.com clothing store it bought for $1.2 billion. - Several hundred stores, mostly selling furniture and electronics, as well as toys or office supplies, use dropshipping on the Shoper platform. But I am convinced that this number will grow rapidly in the coming years, mainly due to integration with new wholesalers," explains Tomasz Tybon. The industries in which this logistics model is popularized depend primarily on the availability of dropshipping wholesalers. Their development in the last few years has allowed the number of stores in Poland cooperating with them to increase.
From the customer's point of view
One of the myths circulating around dropshipping is the extended shipping time for the product. Meanwhile, the opposite is usually true - the order is immediately routed to the wholesaler, whose employees efficiently dispense packages throughout the day. Wholesalers have contracts with post offices and couriers and provide several delivery methods. Nowadays, it is also becoming standard to pack goods in parcels branded with the name of the store, so many customers do not know that they received the shipment from somewhere other than the store.
- The recipe for a good cooperation between a store and a partner is several elements: choosing a wholesaler or a specialized supplier, which offers a wide assortment tailored to the profile of the store, expands it all the time and processes orders efficiently. To this end, it should allow integration with the store system and update inventory at least every few hours," sums up Tomasz Tybon of the Shoper platform .