What is Dropshipping? Advantages and disadvantages

Dropshipping is a way to start an online business without having to worry about inventory. Instead, you order your products from an (online) distributor, who then delivers them to you after they have been sold. This allows you to take less risk as the buyer is more likely to be successful in their purchase. In addition, there are several benefits of doing business through this method.

In this post we are going to show you some ideas and things that will help you with dropshipping in your e-commerce. We will talk about how to deal with certain problems, what happens if you can’t use a dropshipper and much more. Let’s check it out!

What is dropshipping and how does it work?

Dropshipping

We use the expression ‘dropshipping a package’ or ‘dropshipping the package’ to describe when a wholesaler sells their products to a distributor who then sells them to retailers. It’s easy enough to say what it means, but it sounds awkward and literal, but that doesn’t mean you should give up on choosing the more common way of saying things.

If you’re interested in starting a business with little start-up or investment money, or if you want to sell your products online, dropshipping is the latest craze. It glorifies the idea of being your own boss because it is completely stock independent.

To facilitate this process, the retailer enters into an agreement with a supplier of their goods. This supplier is included in a process called dropshipping. Basically, this means that those products are automatically shipped to customers.

With dropshipping in bulk, your products are delivered daily or regularly so that your store never runs out of stock. You also don’t need to use in-store inventory: you significantly reduce the money and time you used to spend and it’s one of the great benefits of this practice.

Most online stores will offer a “list” of items they buy from the manufacturer at a lower price than you will find on the site. The profit offsets the lower price and outweighs any additional purchases.

If you are setting up a Dropshipping store, you will be the middleman between you and your wholesaler or supplier and you will be in charge of selling the items. Basically, it’s about exchanging products for money.

Dropshipping in Spain has become an attractive alternative for those who want to set up an online store and do not have the capacity to do it with their savings, as it is a business without much investment. Dropshipping is a strategy that anyone can use. It reduces risks and allows you to concentrate on activities that mean more to your business.

Difference between Dropshipping and Affiliate Programs

Often, people wonder if there is any difference between dropshipping as a middleman and doing the sales yourself. They are not the same at all: in some cases, you will receive your commission for a sale, while in other cases you will earn up to 10% of the franchise fee for each sale you did not participate in.

Dropshipping is a retail strategy in which the retailer does not buy products to resell them. They partner with wholesale distributors, which are third-party companies, and then sell products to their website or stores. This company offers a centralized pricing system. It’s simple to set prices and easy to adjust margins based on how you want the project to go. You can also start from scratch, just like any other business.

Affiliate programs are often referred to as employees of a person. They promote a third-party product or service using a link that is different from that of the advertiser or publisher. They usually have their own website.

Every time someone makes a sale, you get a commission package. If your website has a lot of traffic, you are more likely to get more sales.

Advantages of Dropshipping

The advantages of Dropshipping stores are:

• The financial gain is minimal, but the time savings make up for it. There is always a profit margin, in fact. In addition, the risk is very small.
• You are not obliged to hire staff or stock products in your e-commerce store. All your suppliers are responsible for doing so. Dropshipping is a good option because it doesn’t require a large investment and will help you avoid some of the headaches of running a business.
• They (the stock and order management systems) can detract from your time so you can better allocate time and focus resources on other areas of your business.
• Dropshipping is scalable and easy to expand. When you are not taking any risk, you can try different products and see which ones work best for your business.

Disadvantages of Dropshipping

There are many disadvantages to the Dropshipping model, but to balance that, you must consider the advantages. However, I show you what the disadvantages are, you have to know them to balance:

1. Retailers may have a lower profit margin on sales. Depending on whether or not a retailer offers commissions, your profit margin will be lower than if you bought and sold directly to customers. With competition in the marketplace, if you keep raising prices, you will eventually lose even more. Keeping your price competitive is always a good idea.
2. Your products may be delayed or there may be incidents along the way. If there is a dissatisfied customer, you will be the one to take care of it. You can also add that if your customer orders from more than one supplier, their order may arrive in parts, so it’s always best to have only one supplier. If you are waiting for a package, having to pay for two packages can be quite annoying, especially if you don’t know when the package will arrive.
3. Even if you save on warehouse and logistics costs, some people may be constantly buying from their wholesaler, there may be thousands. You will need to put a lot of effort into the design and usability of your website, as well as SEO. Because you want to stay ahead of your competitors, for sure. Although, as you well know, SEO, user experience, usability, etc, have to go hand in hand always in any online business, Dropshipping or not.
4. If the dropshipper provides you with an online sales platform, it is almost certain that they will not allow you to edit files to help your company’s SEO. You don’t have access to their private files or their server. In other words, when it comes to SEO, you won’t find any recommendations. So, before you say yes, ask them to explain how the process works and find out if you will be able to access what you need to manage it yourself or if possible, your trusted SEO Agency.

It is important to remember that for any company or business, you will need to register under the laws of each country you work in. This entails some setup fees and other unavoidable monthly expenses, I’m talking about becoming a freelancer of course.

Who uses Dropshipping?

Dropshipping is chosen by two types of people, who use it in completely different ways:

• Less risky entrepreneurs. Those who choose to hire a service through which suppliers provide them with the necessary tools for their business with little or no risk are called “less risky entrepreneurs” and it is true that these entrepreneurs are becoming more and more popular.
• Daring entrepreneurs. They risk a little more by hiring the necessary services themselves and relying solely on suppliers. In this case, it is a significant investment but they have more control over the product and the amount of inventory. This is usually for someone who already has an e-commerce business and wants to add more products without risk.

How to do Dropshipping?

Here are some tips for starting a successful Dropshipping store. Aligning a product, pricing, selling the product and using a dropshipping strategy can help you maximize your profits and avoid potential risks.

Choose your product and niche wisely

This can help you figure out the price of a product so you know how much your competition charges. Researching on the Internet can also help you find out how many people are already selling the proposed item to estimate what kind of profit potential it has. If everyone is already selling, it will be difficult for people to make a profit and it will not be optimal or profitable.

Tip: it is best that you choose a product that has less demand so that it can stay afloat for a while and also be more successful later on.

Beware of the Dropshipping supplier

In case you decide to work with a certain supplier, make sure that they are trustworthy, provide you with all the information you need about the products, that there is open communication for possible future issues and that they also offer logistical support.

1. Dropshipper location. If you buy something in your own country, it will be much easier to avoid customs problems.
2. How the packaging is made. That includes your own logos or branding.
3. The handling of shipments. If you send the invoice with your company’s return address and not at your expense, returns can be counted as a deduction.

Tip: Don’t be fooled by a dropshipper! Find out for yourself if the product is for you.

Negotiate with the dropshipper

It’s not just about trying to improve the prices of the products and thus increase your margin on them. It’s also about reaching an agreement on delivery times with your customers, if applicable. Make sure you take the time to test this information, as it may not be worth the investment if it isn’t.

Tip: Make sure you keep up with account-related tasks. This is crucial.

Pay attention to the clauses you sign

It is crucial to avoid specifying that you are leaving your product up to the vendor and instead assess the expense yourself. The only time you should have them do this is if the supplier fully compensates your business.

Tip: It’s pretty obvious when you should ask if you’re going to assume shipping or expenses! Get informed!

Study well the facilities

Some dropshippers offer payment for products sold, or finance a platform or other support tools to start a dropshipping business. Obviously, these services they will offer you are lucrative. They will only last for a while, until it becomes profitable for them.

Tip: Consider profitability before starting anything else.

The SEO of your Dropshipping store

It is very difficult to position well a Dropshipping store because all the other stores will have the same descriptions on their products. That makes duplicate content and can also confuse your online audience. Do you know about SEO? I’m sure you’re sick of hearing about duplicate content and Google penalties. But just because it’s true, doesn’t mean it doesn’t serve a purpose. If you want to stand out from the competition and sell more, having your own unique copy can make all the difference.

Tip: Although it takes time and resources, try modifying your product descriptions to be different from your competition. Start with the ones that matter most to you.

Marketing

You shouldn’t get involved in this if you can’t invest in online marketing. Let’s face it, if you’re just opening your online store and hoping it will increase conversions on its own, you won’t get anywhere. You need to visit other e-commerce platforms and make sure they are getting traffic while making the investment.

Tip: This can be achieved through many different tactics: creating your own community, moving on social media and investing in online advertising (and even marketing) are just a few good examples. It is important to have a strategy to adapt to the ever-changing technological world.

Make sure your customer is satisfied

It is important to contact customers after they have received their shipments as a way to maintain customer satisfaction. This is also a good way to ask customers about any problems and you will build customer loyalty and get them to buy again.

Tip: You can send an email or a message to the customer and evaluate the process, leaving comments if you wish.

Dropshipping suppliers in Spain

Dropshipping of products has been around for a while and is not limited to a single market. On the contrary, many of the main suppliers are located outside Spain. The dropshipping supplier in Spain best considered by us is Big Buy.

Big Buy is a dropshipping wholesaler that ships from Spain. It also extends to 24 European countries. When it comes to selling in Europe, make sure you know how your business is taxed. It can be very convenient if you enter the market with a global brand, but remember to inform yourself about the tax obligations when selling in any country!

The market for Internet product suppliers is large and diverse. If you are not sure which suppliers exist for this product-business formula, use some of the many existing suppliers to find the supplier that can help you. To do this, we recommend that you remember the guidelines and tips we recommend when contacting any dropshipping supplier.

Choose the right platform for Dropshipping

You may want to check out some of the online store platforms or alternatively, you can opt for the Prestashop platform, one of the best currently.

We are experts in the Prestashop platform, Innovadeluxe is able to integrate your store into the catalogs of different providers for a seamless experience. We have experience implementing with a wide variety of vendors. You have nothing to worry about:

• We import one or more catalogs for you.
• We integrate your Prestashop with more than one supplier, to help you better manage your products and campaigns efficiently.
• Daily catalog import
• You can mark the prices of imported products in sections so you don’t waste unnecessary time pricing everything.
• you’ll definitely love how fast your imports are now!

You can choose between our 3 best external platforms:

1. Dropshipping on Amazon: create an account, choose a plan and upload your products. That’s the basic process. The point that stands out throughout the trial is that Amazon and Google are often used as search engines. If you click here, we offer you a few keys on how you can sell on Amazon.
2. Dropshipping on eBay: You will register your company through our platform as a Seller, providing us with details such as your VAT number. After completing the product information, upload mockups, choose a payment method and upload images.
3. Dropshipping on AliExpress: You sign up to become a store owner and choose a category. Then you add products you are interested in selling to your store, and that’s it!

Conclusion

With all that we have explained to you, we think it is clear that dropshipping is best as a complement to your business or as a “test bed”: you can test a new product before investing in it. If it works, buy more products and sell them again directly.

It is not a good idea to rely on one way to make money. Margins can be small and wholesalers don’t want to handle retailers who sell only a few times a month. Which makes sense. So you may find yourself dropping that part of the catalog.

However, as always, everything is relative and it will depend a lot on your sales force, how you work your store, how you deal with the competition… If you have ever had a Dorpshipping store and you want to tell us about it, you can do it in comments. Or if you are considering it and want to ask any questions, too.