Dropshipping - reduce logistics costs

Service Business

Contrary to appearances, running an online store involves many costs - buying software, domain, hosting, advertising the store, etc. Therefore, if possible, it is worth considering what you can save on. It turns out that there is a way to reduce logistics costs - related to, inter alia, with the storage of goods and their transport.

This method concerns the choice of the supplier, or rather a certain logistic model of online sales, which is related to the choice of the supplier. It is about dropshipping. Below we present what it is and what its advantages and disadvantages are.

Dropshipping - a short definition

As mentioned above, dropshipping is a certain logistic model of online sales consisting in shortening the supply chain. Instead of going to the seller's warehouse first, the goods go straight to the customer after ordering, i.e. the entire shipping process is transferred to the supplier. The role of the seller is limited to acquiring customers, collecting orders from them and sending them to the supplier who fulfills the order by sending the shipment directly to the end customer.

In the case of dropshipping, the store mainly makes money on the difference between the wholesale and retail price.

Suppliers in this model often specify certain conditions, e.g. the number of shipments sent per month (it can be, for example, at least 100 shipments), they handle the cash register and returns, while our task is to service the customer himself.

Advantages of dropshipping

  1. First of all, getting rid of the costs associated with the warehouse, and thus also with its protection, receipt of goods, their storage, sending and handling of returns.
  2. Dropshipping therefore removes the problem of physical storage, while expanding the virtual back-end. Due to the fact that we do not have a specific size of the warehouse, we no longer have to limit the amount of goods offered in our store. Moreover, competent and competent suppliers allow us to introduce the goods to the offer with just a few clicks. Therefore, we do not have to wait for their introduction until they reach our warehouse. Thanks to this treatment, we stay up to date with all the news.
  3. Faster deliveries to the customer, because the supplier no longer sends the goods to us first, but immediately to the end customer. Thanks to which the customer is more satisfied with our service, because none of us likes to wait long for the ordered product.
  4. We reduce the risk of selling without worrying about being left with a full stock of unsold goods. And thus - we can also experiment with various types of products without having to order more of them. Thanks to this, we will involuntarily conduct our own market research. We will find out which products are in greatest demand.
  5. From the moment we choose dropshipping, we have more time to focus on other aspects of the business, e.g. marketing.

Disadvantages of dropshipping

  1. The most important disadvantage of dropshipping is the lack of certainty whether the order will be properly executed. It may happen that we order a product, and at the time of its shipment it turns out that its circulation has been exhausted and the order is not being processed. In addition, you can find an unreliable supplier who packs the goods carelessly and destroys them during transport. Then the customer is not satisfied with the supplier's services, but with ours, because we are the seller of the goods. Having our own warehouse, at least we would be sure of the reliability of the shipment and we could only blame ourselves for any possible oversight. In this case, any delays, problems with returns, damage to goods, etc. negatively affect our image as a seller. However, this problem should be resolved through good communication with the supplier.
  2. Many sellers also complain that they have to limit themselves to only one supplier and are unable to negotiate prices with them, because they do not have adequate facilities - lack of full logistics, lack of warehouses.
  3. Prices are much lower at official distributors or manufacturers.
  4. Shaky order handling, which is usually charged for each package shipped. Well, in one month we can send 300 parcels, and in the next 700, so we will pay similarly more for service. However, if we had a permanent employee, his salary would be the same all the time.
  5. There are also dishonest suppliers, such as those who take over our customer base or offer them their products at a lower price on their own.

Dropshipping is definitely a better solution for smaller stores that order so little that they do not have to create their own warehouses. In addition, for them, the costs of handling parcels will be much lower - due to their small number. Dropshipping is also lucrative for bulky goods, such as steel buildings, where the seller collects a deposit and the building is delivered directly to the buyer's construction site.

When deciding on dropshipping, it is worth paying attention to a few things, including whether the supplier marks the parcel with our logo, how it handles complaints, whether it offers exclusivity or sends goods abroad. There are many more such factors and they depend on the individual needs of the seller, so it is worth considering what we care about.

Unfortunately, dropshipping is still not very popular in Poland, but some progress is visible. Depending on our needs, it may turn out to be an ideal solution just for us, so it is worth considering and this option.