Dropshipping
What is dropshipping?
Dropshipping, also known as Drop Ship or Dropshipment, is a sales method that involves a triangular relationship between the manufacturer, the seller, and the end consumer.
In dropshipping, the seller lists and sells products without physically stocking them. Once a product is sold, the seller sends the order to the manufacturer who then ships it directly to the end consumer.
Dropshipping sales method offers a golden opportunity for:
- the seller who saves on procurement and storage costs of merchandise
- the manufacturer who can expand their sales network by involving a multitude of online operators.
Origins
The origins of dropshipping can be traced back to the late 1960s, even before the birth of the internet and the web, when JCPenney & Sears began distance selling through catalogs.
Soon, the business gained momentum and the seller had to equip themselves with warehouses designed for retail sales, which, even though they were conducted remotely, involved large volumes.
Shortly after, CompuCard seized a great business opportunity in the use of JCPenny's warehouses and decided to feature the competitor's stored products in their own paper catalog.
The ingenious model involved CompuCard applying a markup to the items stored in JCPenny's warehouses. Once they received an order from the consumer, CompuCard "placed" it with JCPenny, who then shipped the goods directly to the customer's home.
With the development of the internet and marketplaces like eBay and Amazon, dropshipping has also grown in Italy, opening up commercial opportunities for small entrepreneurs who can carve out significant market shares with minimal investments.
Key Points
The digital catalog is the essential tool for any company looking to launch a dropshipping business, and it is just as crucial for you if you have this desire.
The first thing you need to do if you want to start this type of business is to obtain a catalog from a supplier who can provide you with information on all the products you want to sell.
A dropshipping supplier's catalog consists of a file in .csv or .xml format, although those who want to reach customers may not be familiar with information on items in this format.
This method of data transfer, through .csv files, can be impractical for those who want to distribute items on platforms of their choosing.
That's why another key element of dropshipping is the software you use to manage your product listings (a listing is synonymous with a digital catalog in this context). The software should allow you to have access to:
By the end of this article, you will discover how we at MarketRock have solved this problem by providing sellers with a solution that includes software and catalogs from numerous suppliers.
A single starting point for dropshipping and a space for commercial exchange between manufacturers and distributors:
- Quick publication
- Flexibility in choosing the items
- Integration with the most popular marketplaces and widely-used eCommerce platforms
Not all suppliers who offer Dropshipping products have software to provide to their partners, and more often than not, they are unable to recommend a suitable and convenient platform. So, don't be surprised if the manufacturer you want to involve seems unprepared.
At the end of this article, you will discover how MarketRock has solved this problem by offering sellers a solution that includes software and catalogs from numerous manufacturers.
A single starting point for Dropshipping and a space for commercial exchange between manufacturers and distributors.
Seller Benefits
A seller who starts to do Dropshipping enjoys a multitude of advantages.
The most obvious advantages include:
-
Outsourced warehouse management
Selling through Dropshipping means eliminating the need for shelves, forklifts, pallet trucks, and manual labor. In fact, all logistics operations are completely delegated to the supplier. -
Near-zero initial investments
Starting a Dropshipping business requires minimal initial investments. Finding a venture that allows you to monetize your audience with costs close to zero is every entrepreneur's dream. With the advent of the internet and the established consumer habit of eCommerce, it is now possible to start by embracing this model. -
Monetizing your fan base
Dropshipping makes even more sense if you already have your own fan base to start with. These represent the traffic you can monetize, your customers who can make your business sustainable from the beginning. Having a fan base, however, means not disappointing their expectations, and with Dropshipping, you can carefully select items that best represent your style and the tastes of your clientele, without necessarily needing significant capital to source the merchandise.
However, the advantages we just mentioned are not the only ones of the Dropshipping sales model.
The manufacturer also enjoys a series of benefits from this distribution method, making it truly successful for all parties involved.
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Advantages for the supplier
As mentioned a few lines above, the advantages of Dropshipping are also, perhaps mainly, for the manufacturer who desires to acquire a massive number of online distributors resulting in a growing number of collected orders. The advantages can be summarized as follows:
- Risk sharing
Increasing one's business outside of a single marketplace, such as Amazon, should be a priority for every manufacturer. In principle, when a customer represents over 15% of a company's revenue, they become a "difficult" customer to keep an eye on. - Organic growth
Having countless business partners means reaching countless audiences indirectly. The growth of product awareness then becomes organic growth, operated through third parties who become an "automatic" commercial engine for every manufacturer who takes this path. - Brand positioning
Placing one's product in an existing storefront means enjoying the induced reflection of the products in that same storefront. Similarly, distributing one's digital catalog on websites that contemplate a certain type of item can provide opportunities for positioning the manufacturer's range of products.
However, not everything that glitters is gold.
In fact, there are disadvantages for both the seller and the manufacturer, although the advantages are the point to focus on when embarking on a business venture.
We will address them in the next section, mentioning what we have learned from over a decade of experience.
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Disadvantages for seller and supplier
Dropshipping requires maximum efficiency, especially in contexts where profitability does not allow for manual operations.
The need to automate processes implies a sometimes challenging mediation agreement between the manufacturer and the seller in terms of:
- Catalog update policy: Products need to be regularly updated in terms of quantity and price. Failure to fulfill a sale by the seller at the expense of the final consumer can result in negative feedback.
- Order fulfillment: For the seller, being able to communicate with the manufacturer quickly and automatically represents an unparalleled value. Efficient order processing and tracking are also important aspects to explore.
- There are other disadvantages for the seller related to the business model. A seller who has to seek online customers will have a harder time compared to one who already has a fan base to target, especially if they can be reached through social networks.
- The type of product also matters, not only in terms of profitability but also in how it fits in the market, considering demand and supply. Ideally, sellers would have unique products with a large number of willing buyers. Unfortunately, many sellers find themselves in the opposite situation with common products, intense competition, and a challenging market to penetrate.
For the manufacturer, the disadvantages are related to the governance of their catalog. Having a large number of commercial partners managed in an uncontrolled manner can lead to sellers applying particularly aggressive pricing policies, distributing the digital catalog across various platforms, and fragmented brand management.
Our Solution
Our Solution
At MarketRock, we have addressed and resolved every problem faced by sellers and producers who want to venture into Dropshipping.
If you are a seller, you can easily and quickly start your online commerce business in Dropshipment mode.
If you are a producer, you can find a multitude of sellers to select from and to whom you can offer your most valuable digital catalog.
We have solved the problems faced by sellers and producers with our platform, which:
- Allows the seller to select products, choose the markets to sell them in, and publish them.
- Enables the producer to intercept sellers and select them according to desired criteria.
- Automates order fulfillment, from the seller to the producer and vice versa, to maximize efficiency for both parties with minimal effort.