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To give you a broad outline, we can define dropshipping as a three-pronged system in which a customer orders a product online from a distributor, who then puts the supplier directly in charge of delivery. In this online sales model, the supplier is in charge of managing inventory, preparing orders and delivering products.
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Far from being a new idea, this concept is the foundation for operations at marketplaces such as Amazon, Rue du Commerce, eBay, Priceminister, etc. This process allows each actor to focus on their core business: e-merchants focus on their role as distributors and manage sales while suppliers manage the logistics of order fulfilment.
Dropshipping has widely developed over the last few years mainly because it provides distributors many advantages:
However, this method also comes with disadvantages for distributors. Dropshipping must be based on a relationship of trust with suppliers. Distributors have to trust the product descriptions and information provided by suppliers in order to keep the promises they made to their customers. This position makes distributors dependent on the strategy implemented by suppliers.
When working in dropshipping mode with small suppliers, distributors must ensure that their partners have a delivery service that conforms to their requirements. For this, they can provide suppliers with an electronic data interchange platform (EDI) and a predefined label format. These logistics solutions provide suppliers with a standard, ready-to-use package they can use to manage and guarantee the delivery and tracking of shipments.
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Within this context of a closer supplier-customer relationship, another form of dropshipping is developing, as the partnership between Zalando and Nike on the German market. This new method allows customers to pick up the orders they placed on Zalando at Nike stores.
Regardless of the dropshipping model used, distributors need to manage their relationships with suppliers and last-mile carriers in order to track the orders placed on their e-commerce websites.
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