Dropshipping may bring to mind watching an aircraft cutting across the sky while carrying heavy loads, and in retail jargon its meaning is not very different. When a merchant is in a dropshipping business, they act as an intermediary between a buyer and a source of products, so when the buyer makes a purchase, the merchant will then ask the supplier to ship the item directly to the consumer.
Key Players in a Dropshipping Supply Chain
Dropshipping is a service, and not a role, and any key player can provide the dropshipping service. A manufacturer, wholesaler, or retailer providing the dropshipping service is invisible to a customer, so when a customer receives an item, the item’s packaging will instead have the merchant’s logo and business information.
Advantages of Venturing Into a Dropshipping Business
Because dropshipping frees the merchant from having to set up a brick-and-mortar shop or a storage area, its biggest advantage is allowing merchants to cut down on startup cost. In dropshipping, merchants need not worry about dispatching items in stock or incurring loss due to perishable items reaching their expiration date. Additionally, without having to pre-purchase items, merchants do not have to decide which items to put in stock because of budget constraints, so customers can have access to a wider selection of items.
Merchants can easily launch their ecommerce business because they do not have to be bogged down with setting up a storage area, receiving items and packing and shipping them to customers, handling returns, and managing stock levels. Scalability is also easy to manage if merchants utilize dropshipping. A traditional business setup keeps a businessperson working for every business they receive, but not so much in dropshipping where a merchant has less incremental work.
Common Challenges in Dropshipping and How to Overcome Them
In dropshipping, you and your competitors could be getting items from the same suppliers, and you might be forced to drop your prices to keep up with competition.
One way of mitigating this problem is to find a supplier that provides exclusive pricing, or prices, at least. Countries such as China have suppliers who offer cheap products, and you can find them by searching online using the keywords “dropship China”.
Decreasing your markup price can be an advantage, however. Although you risk getting low profit margins when you offer cheaper items, you are likely to gain more customers. Customers would buy from your website if you provide detailed item descriptions and other valuable information. You can further provide more value to your items for sale by showing customers related or complementary items. For example, you can also show a list of compatible accessories on the webpage of a laptop computer you are selling.
As you would be sourcing from suppliers which control the inventory of products, you can have difficulty tracking which items are in stock and which items are not available. Dropshipping can also problems in logistics.
Problems can arise when your inventory is not synced to that of a supplier. One important consideration when choosing suppliers to source items from is the technology they use to support syncing of inventories.
You can prevent a delay in shipping, or shipping a wrong item or wrong quantity to a customer from happening by making sure you review the invoice from the drop shipping company. However, these problems sometimes do happen even when you are careful. The best way to handle a delay in shipping is to get back to the customer with a reason for the delay and a date when the item would be delivered. If the problem is about a wrong item or wrong quantity of items delivered, you can go back to the supplier’s return policies to help a customer. Giving a customer a discount for future purchase or a gift item is one way to apologize for the inconveniences due to shipping problems.
Because a supplier ships items directly to a customer, you can’t quality-check the items yourself. As a result, when a supplier has shipped a faulty item, you are to be blamed for the mistake.
When a customer receives faulty or damaged item, you need to know the warranty terms and conditions of the supplier, so you and your customer would not be responsible for the cost associated with the damaged item. Warranties and replacements vary depending on the item being sold.
A customer may order several items from your website, and these items could come from different suppliers or would be shipped at different times of the day. As a result, the individual shipping costs would add up to a large expense.
If you let the customer shoulder the shipping costs, they may think that you are overcharging, and you risk losing their trust. To avoid order cancellation, you can offer your customers free shipping and just think of the shipping costs as indirect expenses you have to pay for making the sale. If offering free shipping every time becomes impractical, you can set up an incentive program where a customer whose purchase reaches a certain amount can get free shipping.
How to Select Suppliers and Items to Make Costs manageable
Drop shipping allows you to source products from around the world. However the cost of shipping items from another country can be exorbitant. To avoid expensive shipping costs, you can choose to get suppliers only from neighboring countries if you are selling locally. Another way to handle expensive shipping costs is to source items with cheaper prices. In the business of dropshipping China has become a leading supplier of cheap items due to its low product and labor costs. Chinese suppliers can deliver products with exceptional quality, and because the problem on inflation rate, which makes other countries struggle in exporting products at cheaper prices, has long been remedied in China, you can get a good bargain when you source from China.
Getting Suppliers from China
Two of the most popular dropship China sources where you can get cheaper products are Taobao and Tmall. If you are venturing into dropshipping China, particularly the local websites Taobao and Tmall, can be a great source of products to sell, but you may find it difficult to do business with suppliers in the Taobao and Tmall websites, mainly because there are suppliers who can’t speak English.
Creating a website that mirrors the products pages of suppliers might also prove to be a very challenging task, and if you are able to create your own website, you would then have to learn how to make sure your website pages are always in sync with those of the suppliers.
The One-Stop Shop for Your Dropshipping Needs
If you want a stress-free way to start a dropshipping business and sell items from China, you can get some help from OpenTopCart which provides you with your own website that mirrors the products pages of Taobao and Tmall. The services of the system-syncing company also extend to ordering the items for you, providing a warehouse where items are temporarily stored and quality-checked, and repacking items. OpenTopCart also prints invoice on your behalf with your website logo and a breakdown list of order details. You get all these benefits and more if you have an agent shopping cart with OpenTopCart. Your dropshipping business becomes easier to start and manage with OpenTopCart.