Dropshipping has become a popular way for businesses to start their e-commerce venture. It refers to a logistic management technique that eliminates the need for stores to keep an inventory. Deliveries are carried out directly from the supplier to the buyer. A dropshipping business can be easily set up and at a relatively low cost. While it seems very straight-forward, this business model has its disadvantages as well as benefits. We have listed some of them, in addition to 7 tips for merchants who want to have a successful dropshipping store.
Benefits and Disadvantages of a Dropshipping Store
– Smaller investment required to set up the business as merchants don’t have to purchase the inventory upfront.
– Possibility to offer the product almost immediately as merchants don’t have to wait until they have the product in stock.
– Allows testing new products at a low risk. Because merchants don’t have to buy the products upfront, whenever they try out a new product, they won’t risk ending up with unsold items in stock.
– Able to offer a wider range of products. Again, by not having to purchase the inventory upfront, merchants can offer a wider variety in their shops without worrying how and where to store everything.
– Saves time. By not having to deal with stock and delivery preparations, merchants save time to invest in growing the business, particularly improving sales conversion and implementing effective marketing and advertising strategies.
– If working with different suppliers, merchants can have trouble processing the orders. Each supplier will have their requirements and that is bound to complicate things and even delay shipment.
– Lack of complete information about the products sold. As dropshipping merchants never actually see the products, this lack of information can make it difficult to answer customers’ enquiries.
– Not knowing when a product is out of stock. Depending on the system used, merchants won’t know a product is out of stock until after the buyer has finalized the purchase. This often generates frustration for buyers and additional work for businesses’ customer support.
– Ultimately, store owners are the ones who have to face their consumers. Although dropshipping eliminates their responsibility in storing and shipping the goods, it also takes the control out of their hands in this part of the buying experience. This complicates the provision of customer support to solve any possible issue.
– Competition. Lots of it. Good dropshipping products are popular among many players trying to get a slice of the market. Because this business model only allows lower margins for merchants, this also means they can’t usually compete by lowering their prices.
7 Tips for Succeeding with a Dropshipping Model
Below we list 7 tips for businesses that have decided, or are considering, to invest in a dropshipping store:
1 – Use a Reliable Automated Dropshipping Solution
Usually, dropshipping stores work with different suppliers who, on their side, also do business with several stores. Because of that, using a reliable and efficient automated dropshipping solution is essential. For instance, for merchants using Shopify, Oberlo is often their go-to solution. However, the ideal tool will depend on how the business is set up. Therefore, research is key to choosing the best automated dropshipping solution.
2 – Find Ways to Add Value for Buyers
This is an important element for every business out there. However, in the competitive dropshipping environment, it becomes even more relevant. Merchants should bear in mind they are not only selling products. If businesses find ways to improve customers experience within the shop and regarding the products sold, they will build a successful dropshipping store
3 – Put in Place Effective Marketing Strategies
This business model has gained popularity thanks to the evolution of performance marketing solutions providing e-commerce businesses with advanced ways to target and retarget their audience. Because of that, it has become more effective to invest in advertising as well as easier to scale. With the time saved with inventory and deliveries, merchants should focus on mastering their marketing skills to grow their traffic and improve their conversions.
4 – Quit Working with Bad Suppliers
If you have any sort of trouble with a supplier, such as frequent shipment of faulty products or using the wrong delivery method, do not hesitate to remove their products from your shop. Choosing your suppliers carefully is essential to optimizing the delivery times.
5 – Provide Excellent Customer Service
As with any other e-commerce business, providing an excellent service to the stores’ consumers is a key factor for success. Remember: customers are always right (even when they are wrong). Having well-prepared staff is a starter. If you’re selling to different countries, it is important to know what customers from other markets expect as well. If you’re selling in Brazil, check out this quick guide.
6 – Use ePacket
In addition to being a cost-effective shipping alternative, ePacket also has partnership with several postal services, such as Correios in Brazil, which dramatically reduces the delivery time.
7 – Keep an Eye Your Competition
Last but not least, frequently monitor your competition. Besides checking their websites, follow them on social media as well. Once you’ve liked their pages, you’ll see ads for their products. This way, you can check what they are advertising and monitor the engagement it is generating, such as how many likes, shares and comments the posts get. Keeping an eye on your competition can help you identify the best products for your store and give you good marketing ideas.