Dropshipping: expand your catalog without all the hassles of logistics!
Published on 25 January 2017
With the rise of e-commerce over the last decade, a new retail fulfilment method has emerged: dropshipping. With orders directly processed by suppliers, this online sales system provides numerous advantages for distributors. Find out more about how dropshipping works and how to integrate it into your distribution cycle.
What is dropshipping?
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.
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.
The pros and cons of direct deliveries for distributors
Dropshipping has widely developed over the last few years mainly because it provides distributors many advantages:
- Reduced inventory: distributors can sell products on their websites that they don’t have in stock. Say goodbye to the financial risks of slow-moving inventory!
- A more extensive sales catalog: distributors no longer have to worry about managing inventory and can focus on expanding their product range to satisfy a wider range of customers.
- Better visibility of products for small suppliers: dropshipping makes it easier for suppliers with reduced catalogs to sell their products.
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.
How to obtain the most from dropshipping
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.
Read as well: Cybersecurity and EDI : is your data at risk?
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.