Dropshipping can seem daunting to brands that are just starting to explore drop shipping.
Partner with retailers to sell your products via their channels. They will send you orders. They send you orders. You fulfill them. You expose your products and services to a wider audience.
Dropshipping is a simple process. However, brands who start to implement drop shipping quickly discover that there are many questions to answer. For example, who is the merchant-of-record, who handles returns, and who owns the customer information?
Each organization has its own needs. Dropshipping will be implemented differently if you can meet these needs. We can make things easier by dividing the various dropshipping models into four broad categories.
This article will discuss the different dropshipping models and their key characteristics. We’ll then break them down so that you can choose which one is best for your company.
Drop shipping via a retailer
This common model allows brands to present their entire assortment or a substantial portion to customers through a retailer’s website.
Dropshipping is a different model from traditional order fulfillment. This allows retailers to offer a wider range of products since they don’t need to manage inventory.
The only limit on what brands can offer customers is what retailers allow — some items might not be suitable for their customer base so they may refuse them to present them through their channel.
This model removes a lot of responsibility from the brand and places them in the retailers. The retailer typically handles returns and provides customer service, but also has ownership of the customer data.
Drop shipping through a third-party marketplace
Some marketplaces determine when products go live while others let brands release products whenever they want. Marketplaces can also differ in how they handle returns, customer service, and customer data.
However, the brand usually has significant control over which products they sell through marketplaces, as opposed to the retailer model. Brands often sell products to customers at retail prices. However, it is possible to sell wholesale on some marketplaces.
Drop shipping via flash sale sites
Dropshipping serves a more specific purpose than the other two. Flash sale sites allow brands to sell excess products via third-party marketplaces or retailers.
Groupon Goods is one example of a site that connects with brands to buy excess product wholesale. Flash sale websites offer customers limited-time sales at a very low price. Although brands may not make significant revenue from this method of liquidating inventory, they often earn more than if the inventory was sold to traditional middlemen.
Flash sale sites, like a drop-ship retailer, handle customer service and own customer data. They also have control over the products they sell. They often offer themed sales, such as winter clothing at a discount or spring clothing.
Drop shipping through third-party logistics
This model allows a brand to establish its own eCommerce site without the involvement of a retailer or marketplace. Drop-shipping is distinguished by the fact that customers can be accessed by the brand. The brand can retain and analyze any transactional data that is stored on the site. The brand ships order to a third-party logistics partner when a customer places an order.
This model allows brands to collect customer information, but it does not expose brand products to new customers. Most likely, customers who visit a brand’s website will be familiar with the brand.
There are many other variations
Many brands may modify or combine these dropshipping models, or even use different methods altogether. These four models will be sufficient for most businesses who want to begin dropshipping.
You now have an idea of the approach that your company should adopt, but it is more likely that you have new questions.
It may be beneficial to review Forrester’s Definitive drop-ship guide for brands and retailers. It will give you a general overview of dropshipping and provide details on the models mentioned above.