Dropshipping

What is dropshipping?

If you run an ecommerce business, establishing agreements with a supplier allows you to sell the products you need in your online store without actually holding stock.

Dropshipping is a business model focused on ecommerce that allows the seller to delegate the logistics management of their store to a wholesaler. This means the seller doesn’t need to store products or maintain physical inventory, which also reduces operational costs. The merchant never comes into contact with the product. Once a purchase is made, the store buys the item from a third party, who receives an instant notification and handles the order, shipping it directly to the customer.

How does Dropshipping work?

Agreement with the supplier:
Merchants establish partnerships with suppliers that accept dropshipping. These suppliers provide access to a product catalog that can be listed in the online store.

Product listing:
Products are added to the online shop’s website with descriptions and prices set by the merchant, but the actual stock is managed by the supplier.

Order reception:
When a customer places an order, the merchant receives the information and immediately forwards it to the supplier.

Processing and delivery:
The supplier handles the packaging and shipping, sending the product directly to the customer. Merchants can track the delivery status to keep customers informed.

Use cases and applications of dropshipping

Dropshipping has become increasingly popular in recent years, especially in these sectors:

• Niche stores that want to sell highly specific products without committing to large inventory

• International ecommerce businesses selling to customers in different countries without needing warehouses

• Entrepreneurs and startups looking to launch an online business without a large initial investment

Advantages of dropshipping

Lower costs: Large investments in inventory or warehouses are not necessary, which reduces financial risks.

Flexibility: You can offer a wide range of products without worrying about the physical management of stock.

Scalability: You can expand your product offering or open new stores without significantly increasing operating costs.

Challenges and considerations

Lower profit margins: In general, profit margins are lower in dropshipping compared to other business models, due to the additional processing and shipping costs imposed by suppliers.

Limited control: The lack of direct control over inventory and the shipping process can lead to quality issues or delays that affect the customer experience.

High competition: Due to the accessibility of the model, many merchants use dropshipping, which can result in intense market competition.