Many people who have joined the drop shipping industry are confused about what a dropshipping order is and what it means. You’re not alone if you’re asking the same question. I can help you understand the process in this article.
A supply chain, as a technical term, is the pathway that products must take to reach customers. This usually includes the wholesaler and retailer involved in drop shipping business module. What is their role in dropshipping? What is the difference between dropship wholesalers and retailers? We will provide you with the details.
Different roles in a drop shipping company
Manufacturer
Our traditional view is that manufacturers are primarily involved in the creation of products, but they do not sell directly to the public. Manufacturers sell more goods to wholesalers and retailers than they do directly. It’s well-known that purchasing directly from manufacturers is the most cost-effective way to get products for sale. However, we often have too little demand to fulfill their minimum shipping requirements. Even if we purchased a lot of lower-priced goods to make money, it is still necessary to rent and maintain a warehouse in order to stock the products and wait for orders from customers. It’s much easier to purchase goods from wholesalers, even if they have a higher price.
Wholesaler
Wholesalers are people who have the financial resources to purchase goods in bulk from the manufacturers and keep the stock. Wholesalers may stock products from different manufacturers, but they will usually specialize in one industry. They raise the price of goods and sell them to customers or retailers in a lower amount. Their minimum purchase requirements are lower than those of the manufacturers. Some of them, however, are strictly wholesalers. This means that they sell only to retailers and not to the general population.
Retailer
We are most familiar with the retail businessmen. They can be any person who sells goods to the public at a marketplace. You can also be a retailer if you own a shop, offline or online, that fulfills drop shipping orders via a supplier.
Drop shipping orders are fulfilled
We now have an understanding of the roles involved in dropshipping. Let’s see how drop shipping orders are processed within this business model. Assume that you own an online clothing dropshipping shop on Chinabrands.com.
Step 1: List your clothing products in your online shop or on your website.
Step 2: A customer would like to purchase a dress from your store so she placed an order.
Step 3: Your customer will receive an email confirmation that the new order has been automatically captured by Chinabrands’ software.
Step 4: Once the customer has paid $200 to your bank account you will place the order with your supplier. This is a large clothing manufacturer based in Chinabrands. This process is typically as simple as the customer placing an order for clothing.
Step 5: If the dress is in stock your supplier will pack it up and ship it directly to you. Your supplier will charge $150 wholesale for this service.
Your name and address will be displayed on the shipping label, the invoice and packing slip. Your supplier will send you an invoice and a tracking code once the shipment is complete.
You can send the tracking number to your customer by email once you have received it. Your customer will then be able to check the logistics information for her dress and has provided the tracking number. Once your customer has received the dress she ordered, the dropship process is complete. You also get $50 for the price difference between your customer’s supplier and your customer.
It’s possible to believe that because this order turnaround is twice, it must take a long time for manufacturers to ship goods. It’s not true. Dropshipped orders often ship much quicker than you might think. The majority of reliable suppliers can ship orders within a few hours. This allows retailers to advertise same day shipping. Chianbrands.com is an example of a supplier that delivers within 24 hours. Its delivery rate is 95%.
Drop shipping is for you?
Dropshipping is an ideal business model for someone just starting out in the online world. Dropshipping is a great way to start your own business. It’s low-risk and easy to set up.
This business model requires minimal capital. It is ideal for store owners who already have an inventory. However, this is a great way to test out new products before you invest large amounts of money.
This business model can be depressing and frustrating for someone who expects incredibly high margins from the start. Dropshipping is not always possible if you consider profit your main interest. Drop shipping’s profit margins are much lower than other business models like manufacturing and wholesaling. This is why dropshipping might not work well with a new brand.
Dropshipping is suitable for a number of types of entrepreneurs. Let’s take a look at a few of them.
Confirmed seller
Dropshipping is a great way to try new products before you invest heavily in inventory that may not be so sellable. This makes it a perfect business model if you are looking for a high level product and business validation before making large investments.
Budget seller
Dropshipping is the most cost-effective way to sell online. You don’t need to buy inventory upfront. Dropshipping is a great option for entrepreneurs with limited funds or who want to keep their start-up costs low.
First time seller
Dropshipping is an excellent business model for people who just want to sell online. Selling online is difficult. Traffic issues can be difficult to solve and take time to optimize. Dropshipping is affordable and allows entrepreneurs to start their own stores.
Drop shipping is not for everyone
Dropshipping is not right for all sellers.
Selling profit-oriented
The dropshipping module’s most significant problem is its extremely low margins. Your gross margins for dropshipping products and companies are generally between 10-20%. After you have paid your credit card and email service fees, you will only be looking at a few percents. A good number of online entrepreneurs are making 30-40k per day from drop shipping businesses with a revenue of one million dollars.
Seller who is brand-focused
Although it is difficult to build a long-lasting, well-known brand that will be sustainable and profitable over time, the rewards can be very worthwhile. Dropshipping is a difficult way to build a brand. There are many aspects of the customer experience you cannot control. You may discover that customers have purchased items from your online store, but the item is not available at your supplier. You may find yourself in a difficult and frustrating position of trying to coordinate with your client and dropshipper. This could lead to a very unpleasant experience for your customer. You don’t control the customer’s experience when they receive the package, as you are not shipping it yourself.
