Sending the product to the customer in dropshipping: understanding the process

Due to the many advantages of dropshipping, it has become a very popular online business model. These advantages are mainly linked to its process of supplying and sending products to the customer, which does not require the seller to have a stock. It is on this precise point that we will focus in this article. 

Dropshipping, shipping, delivery: a reminder of how the system works

If you look at the way it works, you will see that dropshipping is not the same as traditional e-commerce. Dropshipping establishes a three-way relationship between a consumer, your supplier and you. On Amazon, Shopify, Aliexpress or another marketplace of your choice, the consumer will place the order for dropshipping products that interest them. As you have no stock, the order will be passed on to the supplier, who will take care of the delivery. You will thus be a sort of intermediary between the customer and the supplier. 

Dropshipping follows the same principles as e-commerce, except that the seller doesn't have to set up a warehouse for the products he offers for sale. But what's the advantage of having no stock? By building up stock at the start of your business, you're taking a big risk. If things don't work out as you planned, you'll have to bear the financial burden. If, on the other hand, you opt for dropshipping with Amazon, you only commit financially to each order. And in the event that a product offered and promoted on your store doesn't find takers, you can withdraw it without taking any financial risk. 

Many entrepreneurs in the early stages of their business turn to dropshipping for product testing. It's difficult to be sure whether a product will work or not. It's only after a positive test that they decide to stock up on products that work well. And why is this interesting? Because buying in bulk from your supplier will enable you to benefit from a lower unit price. What's more, an online vendor with stock is a successful vendor. 

Which players are at the top of dropshipping with aliexpress or one of its competitors? 

If dropshipping itself is a tripartite type of business, its supply chain includes 4 main players: manufacturers, wholesalers, retailers and carriers. Let's take a look at the first two. 

• The manufacturers

Manufacturers take care of the creation and production of dropshipping products. Most of the time, they do not offer them for sale directly to the public. Instead, they supply the wholesalers, who can then buy them at a reduced unit price. In order to benefit from a reduction in costs, however, the wholesalers, who are usually the suppliers of the dropshippers, need to have a large quantity of orders. The manufacturers are therefore not the actors who take care of sending the product to the customers. This task is, in principle, left to the wholesalers, who take care of their storage before affixing their dropshipping label. 

Small companies that are new to the field do not buy directly from a manufacturer. Only when they have reached a certain level of development can they dispense with a wholesaler and go directly to the manufacturer. The level of development in question is that which involves the provision of a warehouse for the storage of a large quantity of products. 

• Wholesalers

In most cases, wholesalers purchase their products from different manufacturers and then resell them to retailers at a slightly higher price. Their stock is normally made up of products relating to a single sector that are only offered to retailers, not to the general public. They are therefore not the player to whom consumers should go directly. 

Wholesalers have the right to require their direct customers, i.e. retailers, to submit to a minimum order quantity. However, this is lower than that of a manufacturer. Many small businesses use wholesalers to purchase their products because of the lower order quantity. And it is often these wholesalers who take care of the shipment to the final customers. 

Dropshiping with Shopify or one of its competitors: who are the other players?

At the 3rd level, from top to bottom, of the pyramid of product supply to end customers are the retailers. If your dropshipping online shop, for example, sells products from the Brands Distribution catalogue to the public, you are a retailer. The majority of dropshipping companies have the same status, as they mainly deal with wholesalers after obtaining orders. Note, however, that some retailers do not hesitate to call themselves "suppliers". You can fall into the trap of using them to fill your customers' orders. Fortunately, you will be able to recognise them by their prices, which are at the same level as those of most other dropshippers. 

Carriers are the little talked about actor in the dropshipping supply chain. However, it is thanks to their intervention that the products can reach the manufacturer to the wholesaler, the wholesaler to the retailer, the wholesaler to the end customer and/or the retailer to the end customer. This intervention has an impact on the shipping costs of dropshipping with Ali Express or one of its competitors. 

Conclusion

In dropshipping, then, products don't pass directly from seller to customer, as is the case with traditional commerce or e-commerce. Instead, they generally pass from wholesaler to customer. The wholesaler, in turn, buys from one or more manufacturers. Now that you're familiar with the process, are you thinking of getting into dropshipping altogether? Turn to Minea for valuable advice.

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