We often hear about dropshipping and how this business model is great for getting rich quick, but is that really the case? Here’s how it works and what risks it presents.
Dropshipping: one word (actually there are two, "drop" and "shipping"), often used inappropriately, as it is erroneously connected to a concept of gain quick and simple. This is one of the words most sought after today by many Internet users, looking for a simple, undemanding and risk-free job. But is dropshipping really this? To answer this question it is necessary to go in order, starting from the basics.
What is dropshipping
Dropshipping can be defined as “a business model that allows you to sell products online without physically owning them”. Although this definition may leave many people stunned due to its simplicity, it is essential to specify that it is by no means as simple as it seems; in fact, behind a business model that apparently seems very simple and efficient, there are many complications and pitfalls that must be faced.
How dropshipping works
The dropshipping works, as expressed by its definition, in a very simple way, the system is composed of three main players: the seller, the supplier and the customer. In a business that can be defined as “traditional” the actors are the same, however the type of interaction between them is completely different. Traditionally, a seller buys at a favorable price from a supplier and deposits the purchased goods in his warehouse, organizes his e-commerce and puts the products on sale; at this point the customer can go to the site and buy the products he wants.
In dropshipping, although the actors are the same, the dynamics are substantially different: in this case, the burden of the warehouse and its management lies entirely with the supplier, who has the task of storing the goods and shipping them, also taking care of the phase logistics.
Of course, not all suppliers on the market offer the dropshipping service, so it is necessary to inquire in advance whether the one you have chosen offers this possibility or not.
The one who really profits is instead the seller, who not only has no warehouse opening and management costs, but does not even have to deal with the logistical aspects, borne by the supplier. In dropshipping, the seller’s only responsibility is to create an attractive e-commerce site, through advertising and other marketing-related means; and to receive orders. Once received, these are transmitted to the supplier who takes care of processing them.
Dropshipping: what are the advantages for the seller
By doing dropshipping, the seller essentially frees himself of some expenses and some responsibilities, which are entrusted to the supplier. In particular, the seller does not have to order the goods to be kept in stock and manage the latter, which entails one less expense item. Furthermore, the seller does not have to deal with the logistical aspect, that is, the shipment.
These lower responsibilities materialize in lower initial expenses and therefore in more short times for the first gain. The workload, at least initially, should be quite manageable, which does not make it necessary to hire any collaborators, and therefore a greater expense.
Dropshipping: what are the advantages for the supplier
In the context of dropshipping, thinking that it only benefits the seller is wrong, as there are also some for the supplier. Among these, the most important is undoubtedly to have a greater number of customers thanks to the dropshipping business. Vendors using this business model are always looking for new suppliers that are more reliable, faster and with better products.
Dropshipping: what risks for the seller
Dropshipping is seen in an ambiguous way: some think - mistakenly - that it is a great way to get rich quickly and without risk, while others - few - know it for what it is: a way to do business like any other.
In fact, if this way of doing e-commerce is viewed with suspicion, the fault is attributable to the people who, online, have begun to spread the message that dropshipping is a method to be used to get rich quickly and easily without no risk.
This is not the case, this business model in fact presents many critical issues which is essential to consider. The method by which these people try to spread their "knowledge" is realized through courses, which can be purchased by paying large sums of money and through consultancy, for which they ask for figures that make your head spin.
However, dealing with dropshipping without considering the risks connected to it is misleading, in fact this business model has some important critical issues that need to be highlighted.
First of all, the dropshipping-based e-commerce sector has a lot of competition, as it has low entry costs and good returns. Sellers, in order to establish themselves on the market, are willing to earn ever smaller amounts, with the sole aim of securing a few more customers, which means that in the long term the gain is superficial, if not insufficient to maintain the operational activity. .
Secondly, the reliability of suppliers also represents a risk that should not be overlooked, especially if they are located outside the European Union, since it may be difficult to contact them and keep track of their availability.
Dropshipping: what risks for the consumer
Finally, there is also a risk for the consumer: if the ordered product is shipped from a non-European country, in this case, it is possible that the cost of customs fees falls on the consumer, making him lose interest for the product given the high expense.
Original article published on Money.it Italy 2022-11-12 15:18:30.
Original title: Dropshipping: cos’è, come funziona, rischi, come fare
