Surely you have heard of Dropshipping and its meaning, especially if you own an e-commerce or are considering having an online store. But what exactly is it? Why should you choose to sell products through Dropshipping in Spain? What are its advantages? How do you get it started?
Dropshipping is a variant of Ecommerce where a store does not keep the products it sells in stock; instead, when a product is sold, the merchandise is purchased from a third party and then shipped directly to the customer. This means that the merchant never sees or handles the product.
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What Dropshipping means?
That is, Dropshipping meaning: is the sale of products by catalog without investment and retail, in which the retailer is responsible for making the sale, without him being the one who owns the product (ie, makes sale without stock. To do this, the retailer reaches an agreement with the wholesale supplier of the products on sale (called Dropshipper), so that he is the one who will be in charge of sending the orders to the final customer.
In other words, the traditional logistics of e-commerce change completely, since, with Dropshipping, the online store only handles customer orders, invoicing, and the generation of a database. It is the wholesaler who is responsible for storing, packaging, and shipping the products to the customers on behalf of the online company.
The biggest difference between dropshipping and the traditional sales model is that the merchant who sells does not have an inventory. Instead, the merchant buys inventory from a third party as orders need to be fulfilled. This third party is usually a wholesaler or even the manufacturer of the product itself.
Of course, Drop shipping also has advantages and disadvantages. To begin with, since it does not require so much capital, it is possible to start an online eCommerce store without investing thousands of dollars in inventory. Nor do you have to worry about managing or paying for a warehouse, packaging, or shipping orders, or even worrying about managing returns and incoming shipments.
On the other hand and although the initial expenses are minimal, the profit margins are actually not very high. There is a lot of competition in the niches and also you are always depending on the inventory of third parties. Not only that, when working with several suppliers, shipping costs are complicated, which in the end can directly impact the price the customer will have to pay.
As to whether or not this method of selling is worthwhile, just to say that while it has very clear advantages, it also comes with a number of complexities and problems that require careful planning to make the business prosper.
Difference between Dropshipping and Affiliate Programs
This is a doubt that can often arise since in both the sales that are made are as an intermediary. But they are not the same at all.
Eldropshipping is the sale of products by catalog without investment and without having them in stock. You do it from your own online store or from a platform. And you set the price of the product, based on the margins you want to achieve. You can also start from scratch, like any other business.
Affiliate programs consist of promoting a product or service of a third party, through a link that you put on your website or blog and from which they access the other website or business. Every time a sale is made, you get the commission agreed with that person or company. If you already have a well-known website and/or have many visitors, better, because you have more chances of getting more sales.
Benefits of Dropshipping
Compiling a little of what was said in the previous point, we can affirm that the advantages of the Dropshipping stores are:
- There is no risk of economic loss since as we said, the investment is minimal. You will always have a profit margin (how big or small is another matter, of course)
- It is not necessary to hire staff to store the products or manage them. All these tasks are carried out by the supplier. This will take away a lot of headaches, and above all, it will save you on personnel costs. That is why we say that Drop shipping is a good technique for those who cannot make a large investment.
- Since you don’t have to worry about stock management or orders, you can use all your time to develop effective sales tactics and focus more on the business itself.
- Like any online business, it is easily scalable, but in the case of Dropshipping, it is even more so, since it is very easy to expand your catalog. Moreover, since you do not take risks, you can try out different products and see which ones work and which ones do not.
Obviously, there is nothing perfect in this world, so we also have to put on the table the disadvantages that you should take into account when setting up a Dropshipping tent.
- Lower profit margin on sales. As we said before, of course, you have profits. Some may be in the form of commission, so the margin will be lower than if you buy and then sell directly. But watch out, because if it’s a very competitive market and you decide the price, you’re going to see that in order to get a sale you’re going to have to lower it, and therefore, reduce your margin.
- You don’t have total control of the products and their delivery. If they are delayed or there are incidents, facing the dissatisfied or angry customer, you are responsible.
- To this, we can add that if you work with more than one wholesaler, your customer may order (without knowing it) products from different suppliers, which means that their order may arrive in parts. This is quite annoying, especially if you don’t have a delivery time margin, because this means that you have to wait more than one day for the arrival of the courier. Not to mention that you will have to pay two shipping costs.
- Even if you save on storage and logistics costs, just as you are selling that wholesaler’s products, there may be another 548785 people who do as well. You are going to have to work very well -that is, invest- in the design of your website, usability, and above all, the SEO of your online store. Because you’ll want to get ahead of your competitors, right? In fact, you will always have to work on the SEO and usability of your website, whatever your business is. But obviously, if it’s a more differential and unique product (or service), it will be easier for you.
- If the drop shipper provides you with the online sales platform, you will almost certainly not be able to edit files to help your company’s positioning (SEO), since you do NOT have access to these files or their server. In other words, it won’t let you do anything that will help you sell more. Therefore, before you say yes, ask for a good explanation of how SEO works.
And of course, keep in mind that as in any other business, you will have to register as a self-employed or create a society and all this involves some establishment costs and other monthly inescapable.
Who uses Dropshipping
Basically, Dropshipping is chosen by two types of users and for two different things.
- Less risky entrepreneurs. Those who contract a service through which the supplier provides them with the tools for sale: online store, advertising banners, etc.
- Bold entrepreneurs. They risk a little more by hiring the necessary services themselves and depending only on the supplier as far as products are concerned. In this case the investment is greater, but the control is also greater. They are usually people who already have e-commerce and want to increase their product offer without risking buying stock.
How to do Dropshipping?
I can give you 8 tips to create an online store Dropshipping. Don’t get caught in the act, and as always when you start a business, keep an eye on everything. So let’s get to work: Dropshipping, how to start?
Choose your product and your niche
In other words, study the competition. Research on the Internet and find out how many stores are already selling that product you found so interesting. Because if everyone is already selling it, the competition will be brutal and the profit rather small.
Tip: You better choose a less demanded product and start exploiting that niche.
Beware of the Dropshipping Provider
Before starting to work with the supplier, make sure it is reliable, that it provides you with all the information you need about the products, that there is open communication for possible future incidents… and as far as logistics are concerned, we will tell you what you have to take into account mainly:
- Dropshipper location. If it is from your own country, better, this way you avoid customs problems.
- How does he do the packaging. Do not include your own logos or brand.
- The management of the shipments. If it includes an invoice and if the returns are at your expense or not.
Tip: Don’t believe everything the drop shipper tells you, find out for yourself. Read the reviews of its products and what other clients are saying about: shipping & packaging time.
Deal with the dropshipper
It is not only a question of trying to improve the prices of the products and thus increase the sales margins you can get from them, but also of negotiating if possible the delivery times of the products to the customers. With all the information you are given, make sure it is worth the investment.
Tip: Keep your accounts clear. This is essential.
Attention to the clauses you sign
Above all, be careful with the responsibility for returns that we mentioned before. With most suppliers, you are the one who assumes them, so it is an expense that you have to see if you are compensated or not.
Tip: It’s pretty obvious, isn’t it? Always ask if there are actions or expenses that are going to be your responsibility!
The SEO of your Dropshipping store
It is usually very complicated to position a Dropshipping store well, because all other stores will have the same descriptions on their products, which leads to duplicate content. If you know anything about SEO, even if it’s not much, you’re probably already sick of hearing that duplicate content, for Google, is harmful. But that’s not the only reason, it’s that if you differentiate yourself from others, it will be easier to stand out and therefore, sell.
Tip: Even though it’s laborious, spend time and resources modifying product descriptions and titles to make them different from those of your competitors. Start at least with the ones you are most interested in.
Don’t get into this if you’re not going to be able to invest in online marketing. He who does not invest does not win. This is so and no matter how much will you have, just by making an online store you are not going to increase conversions. You have to work on it.
Advice: Create your own community, move in social networks, work your email marketing, invest in advertising … come on, as with any other online business.
Make sure your customer is satisfied
Since the whole post-sale process will almost certainly not depend on you, but on the supplier or drop shipper, be sure to contact the customer once they have received their shipment and ask if everything went well. This way, you will also be building their loyalty.
Tip: The best thing is to send an email or even a message, where the customer can easily assess the whole process, as well as leave comments.
Choose the right platform to start a Dropshipping business
If you decide to have your own online store, of course, WordPress is one of the platforms where you can set up your Dropshipping store. You can also choose also Woocommerce. Read here the case study of a dropshipping store made in WordPress which makes $500,000 / year.
After everything we’ve told you, I think the conclusion is clear. Dropshipping can be ideal as a complement to an existing business, or as a “testbed”: testing the sale of a product without risking capital by not investing in it. And if it works, you buy stock and sell it directly.
However, as always, everything is relative and will depend a lot on your sales force, how you work your store, how you face the competition … If you’ve ever had a Dorpshipping store and want to tell us, you can do it in the comments. Or if you are thinking about it and want to ask some questions, too do it here.
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