Introduction to dropshipping
You've probably already heard of dropshipping. It's a term that we're hearing more and more as e-commerce develops.
The term dropshipping could be summarised as "direct delivery".
In practice, this consists of selling the product of a third-party supplier.
Orders are forwarded to the third-party supplier of your choice who ships them directly to customers on your behalf. This allows the dropshipper to market products without having to buy them, saving on logistics, storage and inventory.
It is an attractive solution for many entrepreneurs because it enables a business to get started with a small amount of capital and minimal overheads, while offering a wide range of products. However, dropshipping is a very competitive model that is difficult to manage due to its high dependence on third-party suppliers.
The Internet has made it easier to connect sellers and retailers from different countries, democratising dropshipping around the world.
Now, we're going to take a detailed look at how this business model works, so you can see if it is right for you.
The term dropshipping could be summarised as "direct delivery".
In practice, this consists of selling the product of a third-party supplier.
Orders are forwarded to the third-party supplier of your choice who ships them directly to customers on your behalf. This allows the dropshipper to market products without having to buy them, saving on logistics, storage and inventory.
It is an attractive solution for many entrepreneurs because it enables a business to get started with a small amount of capital and minimal overheads, while offering a wide range of products. However, dropshipping is a very competitive model that is difficult to manage due to its high dependence on third-party suppliers.
The Internet has made it easier to connect sellers and retailers from different countries, democratising dropshipping around the world.
Now, we're going to take a detailed look at how this business model works, so you can see if it is right for you.
What is a dropshipper and what do they do?
All stakeholders who engage in sales fall under one of three main categories: manufacturers, wholesalers and retailers.
The former manufacture products. They sell them in large batches to wholesalers. Their aim is to sell as many goods as possible in one go.
Wholesalers buy batches of products from different manufacturers and then resell them to retailers, after adding their margin.
Retailers are traders who sell products per unit, or in small quantities, directly to the customer. They are the final link in the distribution chain.
Retailers can be independents as well as large companies with several stores.
In a classical business model, the retailer buys a batch of goods from a wholesaler, to resell them separately to their customers, after adding their margin.
Today, thanks to the Internet, anyone can potentially become a seller. An individual, an artisan, an entrepreneur or a company, whatever their size, can offer products online. But when referring to dropshipping, the term "seller" refers to a person who offers customers a product that is manufactured and delivered by a third party.
In these cases, it is the seller who chooses the items they want to sell, sets the prices and receives the final payment.
They must also be familiar with the regulations of their country, or the countries where they sell, and pay any applicable taxes. They remain responsible for the goods they offer even if they do not take charge of storage, packaging and delivery. They are considered by their customers as the official seller.
They are also referred to as a dropshipper. In contrast with traditional sellers, they work directly with certain wholesalers, manufacturers or retailers who agree to deliver directly to customers on their behalf. They no longer have to worry about purchasing, delivering and storing products.
More and more manufacturers, wholesalers and retailers are now agreeing to dropship. They appear on numerous websites, allowing any individual to contact them.
The former manufacture products. They sell them in large batches to wholesalers. Their aim is to sell as many goods as possible in one go.
Wholesalers buy batches of products from different manufacturers and then resell them to retailers, after adding their margin.
Retailers are traders who sell products per unit, or in small quantities, directly to the customer. They are the final link in the distribution chain.
Retailers can be independents as well as large companies with several stores.
In a classical business model, the retailer buys a batch of goods from a wholesaler, to resell them separately to their customers, after adding their margin.
Today, thanks to the Internet, anyone can potentially become a seller. An individual, an artisan, an entrepreneur or a company, whatever their size, can offer products online. But when referring to dropshipping, the term "seller" refers to a person who offers customers a product that is manufactured and delivered by a third party.
In these cases, it is the seller who chooses the items they want to sell, sets the prices and receives the final payment.
They must also be familiar with the regulations of their country, or the countries where they sell, and pay any applicable taxes. They remain responsible for the goods they offer even if they do not take charge of storage, packaging and delivery. They are considered by their customers as the official seller.
They are also referred to as a dropshipper. In contrast with traditional sellers, they work directly with certain wholesalers, manufacturers or retailers who agree to deliver directly to customers on their behalf. They no longer have to worry about purchasing, delivering and storing products.
More and more manufacturers, wholesalers and retailers are now agreeing to dropship. They appear on numerous websites, allowing any individual to contact them.
Can you dropship from multiple suppliers?
Freeing yourself from the constraints of buying and storing goods potentially makes it possible to work with a greater number of suppliers.
This can be an advantage when you want to offer a wide choice of items to your customers.
It also offers some security in the event that one of the distributors fails.
In some cases, this allows you to optimise your profits by choosing your products from the best offers from different resellers.
It can also be an advantage if your business experiences strong growth. Many sellers have found themselves to be victims of their own success when they run out of stock of their products. This resulted in them losing a large number of dissatisfied customers to whom the products could not be delivered on time. Having multiple suppliers guarantees constant supply, even in periods of high demand.
That said, dealing with multiple business partners at the same time is not always easy. It requires getting to know them well and being well-organised.
You must maintain regular contact with each of them to ensure that deliveries go smoothly.
This is a recommended practice for dropshippers who have some experience. But nothing prevents new starters from considering this option, as long as they carry out thorough research to ensure that their suppliers are reliable.
This can be an advantage when you want to offer a wide choice of items to your customers.
It also offers some security in the event that one of the distributors fails.
In some cases, this allows you to optimise your profits by choosing your products from the best offers from different resellers.
It can also be an advantage if your business experiences strong growth. Many sellers have found themselves to be victims of their own success when they run out of stock of their products. This resulted in them losing a large number of dissatisfied customers to whom the products could not be delivered on time. Having multiple suppliers guarantees constant supply, even in periods of high demand.
That said, dealing with multiple business partners at the same time is not always easy. It requires getting to know them well and being well-organised.
You must maintain regular contact with each of them to ensure that deliveries go smoothly.
This is a recommended practice for dropshippers who have some experience. But nothing prevents new starters from considering this option, as long as they carry out thorough research to ensure that their suppliers are reliable.
The challenges of dropshipping
Dropshipping can be defined as outsourcing the storage and delivery of products to a third party. The type of partner and business arrangement you choose will have a direct impact on the potential challenges you could face.
- Lack of control over the quality of products and shipments
With dropshipping, you sell products that are stored and delivered by a third party. This means that you may not have control over several aspects of the execution process, such as inventory management, the quality of the packaging used, the reliability of delivery mechanisms and product checks before they are sent to customers, for example.
This can lead to issues in the sales process and customer dissatisfaction. This is the main reason for the poor reputation of dropshipping in France, making it a controversial practice. - Strong competition
The main advantage of dropshipping is also its main challenge. Due to the limited barriers to entry, it is highly likely that you will be competing with other businesses selling the same products as you, especially if they are popular or trendy. You will therefore need to find ways to stand out. - Little freedom when choosing prices and promotional offers
Large retailers often buy large volumes of merchandise from manufacturers or wholesalers. This allows them to negotiate what are known as "bulk discounts". They can then pass on this discount to their customers in the form of reduced prices or promotional offers. As a dropshipper, since you don't buy your products, you have little room for manoeuvre when it comes to product costs. - Delivery delays
As mentioned above, dropshippers have almost no control over delivery delays or errors, as this is taken care of by suppliers.
Things become even more complicated when you use multiple suppliers.
You might offer a wide variety of products on your e-commerce store, but they are managed by different providers, each in a different location. As such, a customer who orders several items risks having them delivered in several packages and with different delivery times.
What are the alternatives to dropshipping?
Taking into account the above, it may be that, in your particular case, the disadvantages of dropshipping outweigh its advantages. However, there are other alternatives that you can explore and that we are going to list below.
Taking into account the above, it may be that, in your particular case, the disadvantages of dropshipping outweigh its advantages. However, there are other alternatives that you can explore and that we are going to list below.
The first option is to buy the products wholesale yourself and then use a third-party fulfilment service to store your items, package them, and manage the shipments to your customers. This solution requires a larger initial investment than with a classic dropshipping model, but it allows you to negotiate better prices and have more control over the quality of the products you sell. It also gives you the freedom to launch promotional campaigns as you wish, create product bundles and even offer subscription services.
Naturally, your choice of service provider is very important. Amazon offers a service called FBA, or Fulfilment by Amazon, that lends itself perfectly to this business model. You're better off choosing a company that is globally renowned for its excellent delivery service.
On the same principle, you can also find a manufacturer that agrees to produce personalised items. They will be able to offer special packaging, add your logo to the products, change a particular detail etc. The initial investment may be a bit higher, but it is worth considering. By creating a unique brand, you will set yourself apart from conventional dropshippers. If you couple that with a shipping solution like Amazon's FBA, you could get a head start on your competition.
The last option is to opt for affiliation. This is a completely different business model to dropshipping, but one that can be considered if you want to avoid all the disadvantages associated with selling.
This is an advertising business model where you promote items for which you receive a commission for each purchase that is made using your referral link.
It can be a way to start out in the world of e-commerce or to monetise the audience that you have acquired though your blog or on social networks. Since you don't store, process or ship products, you can operate with advertising fees only.
But if you want your business to evolve quickly, the most effective solution is to customise your products and delegate storage and shipping management to a reliable and reputable company like Amazon. Let's take a look in detail at how this service works.
Taking into account the above, it may be that, in your particular case, the disadvantages of dropshipping outweigh its advantages. However, there are other alternatives that you can explore and that we are going to list below.
The first option is to buy the products wholesale yourself and then use a third-party fulfilment service to store your items, package them, and manage the shipments to your customers. This solution requires a larger initial investment than with a classic dropshipping model, but it allows you to negotiate better prices and have more control over the quality of the products you sell. It also gives you the freedom to launch promotional campaigns as you wish, create product bundles and even offer subscription services.
Naturally, your choice of service provider is very important. Amazon offers a service called FBA, or Fulfilment by Amazon, that lends itself perfectly to this business model. You're better off choosing a company that is globally renowned for its excellent delivery service.
On the same principle, you can also find a manufacturer that agrees to produce personalised items. They will be able to offer special packaging, add your logo to the products, change a particular detail etc. The initial investment may be a bit higher, but it is worth considering. By creating a unique brand, you will set yourself apart from conventional dropshippers. If you couple that with a shipping solution like Amazon's FBA, you could get a head start on your competition.
The last option is to opt for affiliation. This is a completely different business model to dropshipping, but one that can be considered if you want to avoid all the disadvantages associated with selling.
This is an advertising business model where you promote items for which you receive a commission for each purchase that is made using your referral link.
It can be a way to start out in the world of e-commerce or to monetise the audience that you have acquired though your blog or on social networks. Since you don't store, process or ship products, you can operate with advertising fees only.
But if you want your business to evolve quickly, the most effective solution is to customise your products and delegate storage and shipping management to a reliable and reputable company like Amazon. Let's take a look in detail at how this service works.
What is Fulfilment by Amazon (FBA)?
You may want to consider working with Fulfilment by Amazon (FBA). With the Multi-Channel Fulfilment option, you will be able to sell your items both on Amazon and on your own site. Even if you have a successful e-commerce site that enabled you to create a customer base, selling on Amazon has significant advantages. It's one of the most reputable online businesses in the world, if not the most reputable, with hundreds of millions of active customer accounts and millions of unique monthly visitors. Many brands have experienced significant growth by switching to Amazon.
To get started. You need to open a seller account with Amazon. The site offers two types of plans: the Individual plan and the Professional plan. The first is for individuals who sell fewer than 40 items per month. The second is for businesses that plan to sell more than 40 items per month.
You will then have access to the Fulfilment by Amazon service, which takes care of preparing, packaging and shipping orders. It also manages returns and customer service and allows you to benefit from the advantages of Prime delivery (free, two-day delivery).
These benefits are exclusive to Amazon. Most dropshippers waste a lot of time and energy dealing with customer issues such as shipping errors or late deliveries, defective products etc. In addition, some suppliers send their items in poor quality packaging. FBA relieves the seller of all these disadvantages, which are unfortunately all too common in dropshipping.
It also gives you the option to store your products in Amazon warehouses.
This avoids needing to have your own storage space or having to depend on suppliers who are not always up to date with their stock and thus finding yourself selling products that are no longer available.
You will then need to decide which products you want to list on Fulfilment by Amazon.
Some products may not be eligible.
Then, you'll package your products according to Amazon guidelines and ship them to the Amazon fulfilment centre closest to you.
There is a practical guide that explains the step-by-step procedures to follow to prepare your package. Amazon will then pack, store, and ship your items for each purchase made.
There are two types of fees for Fulfilment by Amazon users: processing fees and storage fees.
To get started. You need to open a seller account with Amazon. The site offers two types of plans: the Individual plan and the Professional plan. The first is for individuals who sell fewer than 40 items per month. The second is for businesses that plan to sell more than 40 items per month.
You will then have access to the Fulfilment by Amazon service, which takes care of preparing, packaging and shipping orders. It also manages returns and customer service and allows you to benefit from the advantages of Prime delivery (free, two-day delivery).
These benefits are exclusive to Amazon. Most dropshippers waste a lot of time and energy dealing with customer issues such as shipping errors or late deliveries, defective products etc. In addition, some suppliers send their items in poor quality packaging. FBA relieves the seller of all these disadvantages, which are unfortunately all too common in dropshipping.
It also gives you the option to store your products in Amazon warehouses.
This avoids needing to have your own storage space or having to depend on suppliers who are not always up to date with their stock and thus finding yourself selling products that are no longer available.
You will then need to decide which products you want to list on Fulfilment by Amazon.
Some products may not be eligible.
Then, you'll package your products according to Amazon guidelines and ship them to the Amazon fulfilment centre closest to you.
There is a practical guide that explains the step-by-step procedures to follow to prepare your package. Amazon will then pack, store, and ship your items for each purchase made.
There are two types of fees for Fulfilment by Amazon users: processing fees and storage fees.
- The processing fee for each product sold.
- Storage fees, which are charged monthly.
Processing fees vary based on the size, weight and category of your product. Storage fees are dependent on the space that your products occupy in the fulfilment centre.
We offer specific solutions depending on the type of product you sell.
You can choose between Low-Price FBA or Heavy and Bulky, a service for products with a subscription or Multi-Channel Fulfilment that allows you to sell on your own e-commerce site.
These are advantages that can help optimise your costs depending on your product's specifications and develop your market. Regular dropshipping suppliers do not usually offer this type of service.
Finally, Amazon offers a Pan-European Fulfilment by Amazon service, which allows sales across Europe. To use it, all you need to do is indicate the countries in which you wish your inventory to be placed. Your items will then be shipped from different fulfilment centres within the European Union, thus allowing faster and cheaper deliveries abroad.
This is a huge advantage over traditional dropshipping. Ordinary suppliers usually ship their products from the same address. This means that shipping costs and times may vary significantly from one country to another. This makes it much more complicated to develop an international market. It can also take a long time.
Pan-European Fulfilment by Amazon is currently available in France, Germany, the United Kingdom, Spain, Italy, Poland, the Czech Republic, the Netherlands and Sweden. This option provides immediate access to a large international sales market.
We offer specific solutions depending on the type of product you sell.
You can choose between Low-Price FBA or Heavy and Bulky, a service for products with a subscription or Multi-Channel Fulfilment that allows you to sell on your own e-commerce site.
These are advantages that can help optimise your costs depending on your product's specifications and develop your market. Regular dropshipping suppliers do not usually offer this type of service.
Finally, Amazon offers a Pan-European Fulfilment by Amazon service, which allows sales across Europe. To use it, all you need to do is indicate the countries in which you wish your inventory to be placed. Your items will then be shipped from different fulfilment centres within the European Union, thus allowing faster and cheaper deliveries abroad.
This is a huge advantage over traditional dropshipping. Ordinary suppliers usually ship their products from the same address. This means that shipping costs and times may vary significantly from one country to another. This makes it much more complicated to develop an international market. It can also take a long time.
Pan-European Fulfilment by Amazon is currently available in France, Germany, the United Kingdom, Spain, Italy, Poland, the Czech Republic, the Netherlands and Sweden. This option provides immediate access to a large international sales market.
Conclusion
As we have seen in this article, if dropshipping has become so popular, it is mainly because it is so accessible. This business model can be suitable for many sellers and has allowed some of them to develop a sustainable and lucrative business. But you must remember the disadvantages of dropshipping.
This is why entrepreneurs have turned to an alternative trading system that consists of trading their merchandise directly with the manufacturer and using a third-party supplier to manage storage and shipping. A company with the international standing of Amazon, renowned for the excellence of its delivery service, seems a good choice of partner for this option.
But how you want to manage order processing for your online business is up to you. It all depends on the initial investment you can make and the type of business you wish to develop.
This is why entrepreneurs have turned to an alternative trading system that consists of trading their merchandise directly with the manufacturer and using a third-party supplier to manage storage and shipping. A company with the international standing of Amazon, renowned for the excellence of its delivery service, seems a good choice of partner for this option.
But how you want to manage order processing for your online business is up to you. It all depends on the initial investment you can make and the type of business you wish to develop.
When combined, these tools can really drive your brand on the website.
FAQ
Is dropshipping profitable?
Not necessarily. It can be, but the sector is becoming more and more competitive, which is forcing many dropshippers to operate with reduced profit margins.
Do I need to register my business to do dropshipping?
To start dropshipping, you need to be registered from the moment you start operating. In France, registering as a micro-entrepreneur is currently the simplest and quickest way to start an online business. However, it also has limitations such as turnover thresholds. There are also other statutes, such as société à responabilité limitée (private limited company — SARL), société par actions simplifiée (simplified joint-stock company — SAS) and société civile immobilière (non-trading real estate company — SCI), each with their advantages and disadvantages.
Is dropshipping allowed on Amazon?
Yes, as long as your business complies with Amazon sales policies.
What do I need to register on Amazon?
To register, you will need:
- A business email address or an Amazon customer account
- A chargeable credit card (international cards are also accepted)
- A valid passport or ID
(identity verification protects you, in the same way it protects your customers) - Your business registration information
- A VAT number
Is Amazon right for my business?
Amazon is suitable for businesses of any size. Small and medium-sized businesses thrive there and account for more than half of the products sold by Amazon around the world.
How much does it cost to sell an item on Amazon?
This depends on three factors: your selling plan, referral fees and shipping costs.
- The selling plan costs €39 per month (excl. tax) for the Professional plan and €0.99 per item sold with an Individual plan.
- Referral fees are the fees charged per item sold. This includes referral fees and closing fees, which vary by product. Most referral fees are between 8% and 15%.
- Shipping costs with Fulfilment by Amazon (FBA): you pay the shipping for each order and pay the storage space for your items on a monthly basis.
Is dropshipping legal?
Yes, dropshipping is a legal method of fulfilling orders.
However, you must choose your suppliers and the contracts they offer extremely carefully.
However, you must choose your suppliers and the contracts they offer extremely carefully.
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