With an ecommerce business based on dropshipping you only pay your supplier for the products you actually sell. This means that you do not keep products in stock and you are not the one shipping orders. Even though it is not your ideal get-rich-quick scheme, it is a very popular business model. So, what are the pros and cons of dropshipping?
- What is dropshipping?
- Dropshipping companies (in Europe)
- The benefits
- The disadvantages
- Frequently Asked Questions
What is dropshipping?
With a dropshipping store, you sell products in your own online store that are shipped directly from a supplier or wholesale company.
The customer still buys your products, but the order goes to the manufacturer or wholesaler who will then take care of the shipping. You do not need to send a parcel yourself and you do not need to have shipping software. All in all, this popular ecommerce method has its advantages and disadvantages.
The popularity of dropshipment
The dropshipping business model is getting more and more popular. And it seems to be used mostly by entrepreneurs who just started their ecommerce business. Many products you see in Instagram ads, for example, are sold by online retailers who are active in the dropshipping business.
Customers often do not notice that an online business is selling products through dropshipping, although there are some factors that could give it away. Think of very long shipping times or generic product images which you can also find on other websites (like with AliExpress dropshipping).
Customers often do not notice that a business is selling products through dropshipping.
Marketshare of dropshipping stores is increasing
Dropshipping is nothing new, but it still offers many opportunities for ecommerce companies. Back in 2014, a study showed that between 22 and 33 percent of online retailers in the US used it as their primary method of order fulfillment. You can imagine that that share has only gotten higher in the recent years.
This is because more and more suppliers offer dropshipping, who are also integrated into popular ecommerce software, which enables retailers to go into the dropshipping business.
Another study, done by the Lehigh University, showed that dropshipping was recognized by 88 percent of retailers as being “inevitable for their long-term success”. Among the benefits, they mentioned increased revenue and improved customer support.
Dropshipping suppliers (in Europe)
If you are looking for dropshipping companies, it can be hard to find the perfect one. It is also rather impossible to list all dropshipping suppliers here, as there are countless suppliers suited for different retailers, industries, and countries. Here are three companies that might be interesting:
The Spanish dropshipping supplier BigBuy has more than 150.000 products and is able to dropship all over Europe. Product categories range from home and garden, beauty and health, sports, toys, fashion, and electronics. Next to buying products for wholesale prices per product, dropshippers can become a subscriber at BigBuy for extra benefits. With their Marketplace package, you can easily sell their products on marketplaces.
dropshippingXL offers 90,000+ vidaXL products to add to your online store or marketplace account. vidaXL is known for its very extensive furniture and home & garden categories, but also supplies products from many other categories. It offers fast delivery in Europe and integrations with Lightspeed, Magento and WooCommerce.
With DSers, sellers can easily add products from dropshipping suppliers on AliExpress to the webshop, without buying them themselves. There is a wide range of products with low prices. Ever since the discontinuation of Oberlo, Shopify's former dropshipping plugin itself, many merchants have been using this app.
The benefits of dropshipping
There are many benefits to dropshipment. The most important one is that with this method, you probably do not have to invest a lot in order to start an ecommerce store.
With the ‘traditional’ way of conducting ecommerce, you buy products in bulk, you stock them somewhere and you ship them whenever someone orders them. This means that you need money to buy the products, you need warehouse storage space to stock your products, you need proper stock control and you need logistics companies to get the items shipped.
With dropshipping, you only need to make a deal with a wholesaler or manufacturer that dropships the products. Then, if a customer orders something you offer in your online store, the company that has manufactured and stocked the products in a warehouse will ship them to the customer.
With dropshipping, you only need to make a deal with a wholesaler or manufacturer.
You do not need to worry about products that do not sell well. even though you are not sure you will sell all of them. This also means that you will not have stock that could get out of date, that could get out-of-season or that might end up even worse in case of a fire, flood, or other (natural) disaster in your warehouse.
For starters and growing online stores
To start a dropshipping business seems like the ideal way of doing business for entrepreneurs who are new to the game. But it could also be an easy way to scale your business. If you are ready to sell more items, just include more items of your dropship partner (or maybe close a deal with an additional one) in your shop. Scaling your online store is literally a mouse click away from you.
Dropshipping seems an ideal business method for new entrepreneurs.
Expanding your assortment
This is why dropshipping is ideal for expanding your product range. If, for example, you are not sure if certain products or product categories will turn out to be a success, just use dropshipping to find out. If it does not fit your online store or business model, just remove the items from your store. There is no obsolete stock you need to get rid of!
Dropshipping can also be used for up-selling opportunities. Imagine that you do have stock and you sell a very popular product. Maybe, you are the only one in your market that sells this product. That is great, but you could be missing out on extra revenue if you do not up-sell.
With a third party supplier that offers shipping this can become a quite effortless job. Just pick out the goods that perfectly accompany your unique product and offer them in your online store through dropshipping. This way, you do not have to invest much to maximize the possibilities of your online store.
The disadvantages of dropshipping
Of course, there are also many disadvantages. And many flashy marketing websites promoting dropshipping often do not elaborate on these drawbacks. But it is important to know what you are dealing with once you make the decision to operate a shop through dropshipping.
You are still responsible
The most crucial disadvantage of dropshipping is that you still have a responsibility to your customers.
They may end up getting the products from your dropship partner, but they placed the order with you. They do not have anything to do with the fact you ‘outsourced’ your warehousing, fulfilment and shipping. As an online retailer getting the money from the customer, you are the party that is responsible when that customer is not satisfied with the order.
So, if a dropshipping wholesaler or manufacturer gets in trouble and can not manage to ship the products in time, or the products go out of stock, you are the one who has to solve this issue with the customer.
Not the most original assortment
Another drawback of dropshipping is that, due to the popularity and the limited number of dropship providers, you probably will not have the most original offer out there. The products you can sell with a dropshipping model, are also the products thousands of other online retailers can and will sell.
Generic product images
In line with this are the product images that you may use when you start dropshipping. Usually, there is nothing wrong with these product images. But often they are not very detailed, or they are made for a different target group (Chinese consumers for example) than the one you are aiming for.
An extra drawback with regards to these generic product images is that it is quite easy to find the original source with tools like Tineye.com or reverse image search features in search engines like Google and Yandex. These can be used by both your customers and your competitors! With a simple query, customers can buy the exact same item somewhere else (maybe for a lower price), while your competitors can easily find out where you buy your products and then sell these themselves.
Frequently Asked Questions
Here are some frequently asked questions about dropshipping:
What is dropshipping?
Dropshipping is a business method in which online retailers sell products they do not store themselves. Often it is the wholesale supplier or manufacturer that handles the storage, fulfilment and shipping. The customer still buys from the online retailer.
How is dropshipping different from wholesale ecommerce?
It is similar to wholesale, but there is an important difference. With wholesale, you buy the items you want to sell and you stock them. With dropshipping, another company is taking care of the storage of products and the fulfillment (getting the items to your customers). You only pay for the items customers have ordered.
How do you take care of returns with dropshipping?
As an online retailer in the European Union, you are still responsible for possible returns. In the EU, the rules state that customers must have the opportunity to cancel and return their online order within 14 days.
So, if you sell products online through a dropshipping program, you are responsible. If a product is broken or defective, you might consider shipping a new product to your customers without asking them to return the broken one. Otherwise, the costs could be too high for you.
For non-defective products you could charge shipping costs if the customer wants to return the items.
Where do I find dropshipping products?
Many people who are interested in dropshipping want to know how to find products to sell online. A good way is just browsing the assortment of wholesale platforms. If you are looking for wholesalers that offer shipping to consumers as well, please check out our list of European dropshipping suppliers.