What is dropshipping

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 sent immediately after their payment 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

Literally translated Dropship from English - Drop Ship. Direct deliveries from the manufacturer to the buyer have many advantages, the main of which is the lack of such an expensive thing as a warehouse.

Dropshipping is based on the idea of ​​creating your own online store or online auction. Only instead of thinking about stocks and their placement in the warehouse, you just need to conclude contracts with one or more suppliers (manufacturers or wholesale companies).

Finding a supplier willing to work with dropshippers is not so difficult. Nowadays, more and more industrialists and wholesalers focus on direct deliveries to the consumer through an intermediary. The fact is that many wholesalers and industrialists are in many ways profitable to work with dropshippers. Firstly, you do not need to advertise your product. Secondly, intermediaries do not take time for questioning (delivery methods, payment options, prices, etc.). On the contrary, dropshippers themselves answer annoying questions from customers.

Choosing the right supplier is also easy: just visit their websites and choose products suitable for the business. An application for cooperation can be issued via the Internet.

Creating a website for an online store, promoting it to the top and technical support functions can be entrusted to specialized companies or individual programmers. But it is better to fill the goods with the entrepreneur yourself, supplementing the goods with annotation.

The choice of pricing policy also remains with the intermediary. At first, to win customers, prices can be slightly lower than competitors. Then - focus on the average price of competitors.

In the direct supply business, the supplier is responsible for the packaging and delivery of the goods to the final recipient. But the buyer will still ask the owner of the online store questions about the timing of receiving the goods, so the intermediary uses the tracking service to track the delivery: 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 at any time of the day see what is with the goods 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 give away sales functions to partners. In a direct supply scheme, such a partner is an online store or an online auction. He at his own expense provides a "showcase", carries out marketing research, promotes products on the market, takes orders and executes transactions.

After the intermediary accepts payment for the goods from the buyer, data on orders made and payment for them immediately goes to the manufacturer. The latter assumes the responsibility to pack the goods appropriately 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 hold inventory, and therefore does not need a warehouse.

Benefits of Dropshipping

Most of the advantages of this type of business are directly related to the lack of a wholesale link and any kind of warehouse:

1. A business with direct deliveries can be established with a minimum of initial capital. Some money will still have to be invested, but these amounts will be relatively small.

2. Minimum financial risks for the intermediary: he sends the money for paying the goods to the manufacturer only after he receives the money from the buyer.

3. Minimum starting capital means freedom from lenders and investors.

4. There is no need to keep a warehouse, take care of inventory and balances, have a delivery service, office and office staff.

5. The supplier assumes all responsibility for the delivery of goods to the final consumer.

6. An intermediary for expanding the range and lowering prices can easily start cooperation with several suppliers (if this is not prohibited by the contract). If one supplier does not live up to expectations, it can be easily and quickly replaced.

7. If there is an agreement that the supplier delivers on behalf of the intermediary, he (the intermediary) can easily create and promote his own brand.

8. The intermediary is not tied to any category of goods. 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.

Shortcomings in the business of direct supply

Some disadvantages of dropshipping follow from the advantages:

1. 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 go looking for him on another site, and the intermediary will lose him as a client.

2. 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 mail, difficulties at customs, and much more.

3. In Russia, many customers of online stores love to deliver goods on the day of order. If this is not possible, they just leave to look for the goods on another site. The problem is that if the supplier and the buyer are in different regions of the Russian Federation, it is absolutely impossible to arrange delivery of the order day.

4. The intermediary depends entirely on the supplier in the following matters: speed of delivery, product quality. Therefore, the reputation, integrity and reliability of the manufacturer should be carefully checked. And at the same time, think over a mechanism for resolving conflicts with a buyer.

5. It is worth noting that the buyer not least pays attention to the cost of delivery, and in our country it very much depends on the remoteness of the buyer from the manufacturer.

6. The complexity of working with customers. The buyer is usually very picky and picky. And likes to ask a wide variety of questions. Moreover, according to statistics, out of 100% of those interested, only 20-30% ultimately buy something.

However, with competent and responsible actions of the intermediary, with the supplier’s clear work and with a well-established sales scheme, all these risks can be reduced to almost zero.

Popular payment methods

If the intermediary promotes the goods through the eBay online auction, in this case there will be only one payment method - through the PayPal payment system.

In our country, there are much more payment options at the RusDropshipping site. This attracts potential buyers and keeps existing ones. Among the payment methods are provided:

• 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 goods. That is why lately there are more and more payment options: cryptocurrencies Bitcoin, Ethereum and others. But, despite this, more than 50% of Russian buyers still prefer to pay in cash upon receipt of purchase.