- May 2, 2018
- Posted by: Roger Walker
- Category: Business
The dropshipping is the sales system in which the order of a consumer arrives on a distributor’s online store, but it is a wholesaler responsible for sending directly to the end customer. The distributor, who owns the online store, manages the optimization of the store and procures traffic to the website. The wholesaler will manage all the activities related to logistics: prepare the package, deliver it to the courier, track the delivery until the product is in the hands of the customer.
I wrote previously on dropshipping, comparing it with the sale on the marketplace. It is a widespread sales system that deserves further details on at least two fundamental aspects …
- The choice of suppliers,
- The challenges of management and customer capture by the seller.
How to choose the dropshipping supplier?
The reputation of the supplier
A good provider has a good reputation and the search for comments and reviews on Google is a good way.
However, keep in mind that everyone has problems and that the bigger the company, the easier it is to find someone who is not completely satisfied. A few negative comments are not enough to definitively judge a supplier.
Test the supplier
You can always try making a friend buy and see how the delivery and tracking process works.
The dropship is also a sales system used for items that are difficult to find and that need an ad hoc production. It often happens in the furniture and furniture sector for all products that do not have a stock in stock.
Delivery may be slow – 1 month after the order, and the estimated delivery date must be indicated and respected.
Who sells your supplier?
Does your dropshipping supplier also sell to your competitors in the same sector? Is it a wholesaler that also sells directly to the consumer? It is good to know these things first.
What influences your purchase price?
Is the price reserved for you as an online shop influenced by the single and general amount of purchases and the volume of business you develop at the dropshipper?
Does the vendor sell all over country?
The ability to access price lists and products available for sale throughout country is a beneficial aspect to consider.
Dropshipping management challenges
Low margin on sales
If you buy in quantities from a wholesaler the price will be calculated on the quantity. A dropshipping supplier sells a single unit each time an order arrives. He then has the task of preparing the delivery and must have a dedicated organization. The consequence is a higher purchase price for the seller. The average margin that will remain at the seller will be lower.
On this average margin, the seller must base all his expenses, especially those to generate traffic and promote sales.
Three possible solutions
- Increase prices
It is a solution that can be applied on some products, but not on all, since you have to face the competition on the price. If you do not have products of an absolute niche that you control directly, you must consider the competition.
- Offset prices with sales volume
Identify the products that can give high sales volumes and push on those, instead of pushing other products.
- Negotiate the price directly with the supplier
It is always possible to negotiate the transfer price with the supplier and it is always possible to have a discount. It is also evident that a supplier can (must not) discount the goods if the general volumes are interesting and growing.
Too much competition
Dropshipping is easy, apparently very easy. So easy that everyone can create a store and sell products. If the barrier at the entrance is weak, it creates a problem. All end up selling the same product, not to mention the fact that there is already Amazon and another thousand online shops that do.
Two possible solutions
- Your shop is the best
The shops are not all the same. There are those who do things very badly, those who do not focus only on your product, who do not put any effort into product descriptions. If you can really make a great online shop and make yourself recognized as the best in your industry, you know it will be difficult, but you will have a reward.
- Go where others do not go
90% of a store’s management is marketing the products. Most sellers always repeat the same things, on Google, price comparison sites and social networks. Coming out of the paths traced by everyone and trying different things is not easy, but you have few other possibilities. It also means understanding how to better use the tools, starting from the needs of your customers.
Minimal branding opportunity
If you do not have control over goods, packaging, shipping, post sales communication, you have little chance of building a brand from dropshipping.
An effective way could be to put a personal thank you note in the package and send it with a personalized box. But, unless you’re the only client of the dropshipper, this operation is difficult and more expensive.
Some possible solutions
- Great customer support
You must have control over the entire customer experience, from purchase to delivery and follow every sale step by step.
- Impressive product pages
Great images, powerful description, all information immediately accessible. The pages must be such that there is no need to go elsewhere to look for an identical or similar product.
- Have a simple and effective checkout
- Customizing transactional emails that are usually terribly anonymous and boring.
- Call to thank for an order Creating a personal relationship helps in sales, after-sales and subsequent sales.
Costs of the PPC campaigns
Starting and running PPC campaigns can be very difficult. At an early stage the costs could outweigh the benefits and you always have to count on your margin. How much does it cost to acquire a customer? How much can you pay to get a sale? How willing are you to sacrifice your margin?
Some possible solutions
- Optimize your ads
Easier said than done when you have limited budgets and need to get results.
- Work with campaigns paid to performance
It’s a more expensive solution (the performance you pay is more than the cost of an optimized campaign), but it could be a sales solution. Always remember that time is money.
- Work with other traffic sources
If Adwords is too expensive, work with Facebook Ads, aim to increase leads, develop a content strategy, increase your links …
Sales and shipping management
The thorn in the most painful side is all about things that you do not control. Your online shop might say that a product is available, but the moment you sell it, the supplier has sold out. If the product is available again, the customer should be convinced to wait, if it is really unavailable, you must face the cancellation of the sale. Two situations that it would be good to never tackle, unless you do dropship on marketplaces.
But you can also meet the supplier who simply does not pay attention, who does not have the goods because he receives it from the manufacturer. Your customer is impatient, you are responsible for the sale and you do not have operations control!
Choose the supplier carefully, know the whole process well, commit to follow it diligently, keep in touch with the customer.
Understand that there is nothing easy and discounted in selling dropshipping. Not having the stock of goods is a big advantage (you do not invest in circulating capital that continually devalues), but you have to face this work for what is actually worth. It’s a serious and demanding job and you have to know how to do well. As you have learned well, there is no sale without mathematics.