Will 2019 be the year of dropshipping? Indeed, for several months, this word has been in the mouth of many e-merchants or individuals. But what is dropshipping really? How does it work? Is it really interesting? And finally, will dropshipping explode in 2019? Let’s take stock of this way of understanding e-commerce …
What is dropshipping? How does it work?
Dropshipping, which can be translated as “drop shipping”, is a tripartite marketing method. It includes an online sales site, a supplier and a buyer.
In dropshipping, the online sales site sells products without having them in stock. As soon as the buyer places an order on this site, the merchant informs the supplier of the sale. The supplier then takes care of the production and dispatch of the order. Then, the merchant site pays the supplier the amount of the order reduced by its commission.
The difference with a marketplace is that the merchant site does not notify buyers that the product will be produced and shipped by a third-party supplier. The supplier also ships the product purchased in a package branded on behalf of the seller site. It’s a real white label that is developing in terms of logistics.
Why are all the players in online sales interested in it?
When we talk about the term dropshipping, I think it is important to distinguish between traditional e-merchants who wish to rapidly increase their range of products and individuals who wish to develop an activity parallel to their main activity.
The new Eldorado for budding entrepreneurs
Indeed, for many individuals who wish to embark on e-commerce, dropshipping seems to be the new El Dorado: the absence of stock acquisition and logistics management seems to be a strong argument to eyes of all these apprentice entrepreneurs.
These beginner entrepreneurs then think that it is enough to create a site and sell niche products of a Chinese wholesaler such as AliExpress to make hundreds of sales per day. Unfortunately, the reality is not as simple and many end up giving up due to lack of motivation, skill or even funds.
In my opinion, like any business creation in dropshipping, it is necessary to find the right product, at the right price and to target the right people for this activity to work. And above all, selling online is like everything, you can learn it. Too few individuals who embark on the adventure take the time to follow the training that will allow them to acquire the basics.
For example, a few years ago, I published an article on this blog that listed the various features essential to the effectiveness of a site. Although it is a bit dated, it is extremely topical and too few new e-merchants are applying these good practices.
An interesting axis for e-merchants
When an e-merchant is interested in dropshipping, it is generally with the aim of rapidly and simply increasing their range of available products.
Likewise, dropshipping seems to be a very good alternative for testing a new market or new products without having to bear the risk of buying and storing a stock, which often consumes cash flow.
E-commerce: an increasingly competitive sector which is compartmentalized
,But it is not the only reason. In my opinion, dropshipping is of increasing interest to online commerce players, because the competition is increasingly fierce and I have the impression that the sector is destined to specialize by type of activity.
Indeed, to have an e-commerce site that generates turnover, it is now necessary to master the acquisition of traffic, ergonomics, the management of a product catalog, inventory management, logistics … Etc. Each action must be carried out by an expert under penalty of seeing the open margin melt like snow in the sun.
For me, dropshipping is the first step in this specialization. Indeed, the management of the logistics of a stock of products is a very time-consuming problem, but also very money-consuming. When we see the success of the service “shipped by Amazon”, but also of the marketplaces, we quickly understand that there are now four categories of actors:
- Companies specializing in the production and / or purchase of products: they find and / or produce products and seek to sell them. The best example being all those marketplace sellers who no longer even have their own site;
- Companies specializing in the sale of products: generally historic e-commerce sites that have developed a marketplace activity if it was not native to their site;
- Logistics companies which make their specialty the management of the last kilometer, a major axis for ever faster delivery;
- Hybrid players, such as Amazon, who know how to manage several aspects of the activity of an e-commerce site.
The problem is, not all sites are Amazon. And yet, they must compete ever more with this giant which exploits all possible markets.
In my opinion, it is partly because of the success of Amazon that dropshipping is currently attracting real interest: players who do not have the capacity to be Amazon are thinking about specializing their activity.
Dropshipping thus compartmentalizes the activities between online sales specialists and purchasing / logistics management specialists. Each of the players can thus focus on what they can do best and delegate / outsource the management of other tasks.
Is it really a good deal?
However, is dropshipping really a good deal?
In the United States, 40% of e-commerce sites use this marketing method. In England, statistics are still very difficult to find, even for FEVAD. However, it seems that the turnover generated by this dropshipping is still very low compared to the overall turnover of traditional e-commerce.
If such a volume of merchant sites uses dropshipping to develop their activity, it is because this marketing method can be interesting for the different players. It still has to be well managed.
Who says dropshipping, says distribution of the margin between the various actors involved. For a merchant site to be able to live in dropshipping, it is essential that it applies all of the good practices in terms of online commerce, but also that the supplier allows it to have sufficient margin to cover the costs. customer acquisition.
Similarly, the merchant site must be aware of the costs associated with the production, storage and shipping of the goods it markets. The key to success is therefore a good distribution of the margin between the different players.
Will 2019 be the year of dropshipping?
It is difficult to answer yes or no to this question, because many brands still refuse this marketing method, as they prefer to try to sell through their own site or via marketplaces.
In my opinion, players in online sales will gradually realize the importance of specializing in order to exist in the face of the growing rise of Amazon and the like. They will also realize the danger linked to the dependence which is being created due to the omnipresence of the market places.
Dropshipping should therefore gradually come to mind and suppliers’ offers should develop. However, changing mindsets takes time. Thus, it is unlikely that England will catch up with the United States only in 2019. But it is certain that this marketing method is likely to develop in the coming years.