Welcome to Episode 3 of the E-BusinessOnline Podcast
Host & Speaker: Fred McKinnon
Topic: Introduction to Dropshipping
Summary: In Episode 3, Fred McKinnon discusses the process of dropshipping in e-commerce.
What is dropshipping?
Dropshipping is a process where a seller utilizes a 3rd party (that we will call a drop shipper) for their catalog of products and for the fulfillment of their product.
For example: let’s say I’m registered as a reseller with a music store. I list their Gibson Les Paul guitar for sale on Amazon and someone buys it. When Amazon notifies me of that order, I then relay that order information to my music store partner, who then packages the guitar and ships it to my customer.
If they take that a step further, and they ship it to the customer with my company’s name on the packaging, and there is no mention of the music store, it’s called a “blind dropship” because the customer is “blind” to the fact that as a seller, I didn’t personally ship that order to them from my physical inventory.
Pros and Cons for Dropshipping
- ability to list a wide variety of products, based on the dropship distributor partners you can sign up with.
- cheap – no money tied up in the purchasing of inventory that you may or may not sell
- allows you to gain quick traction in the market with additional sales due to expansive catalog
- potentially exposes you to manufacturers and brands you would not have a relationship with otherwise
- builds your business credit and buying power. [side note: never spend more than you can lose]
- quality control – you don’t see the product or the package, or how it’s shipped
- risk of overselling due to inventory not being available
- risk of brand restrictions or trademark infringement [ask to only sell what doesn’t require special authorization]
- risk of loss due to price fluctuation
- unknowns in overall financials – landed cost isn’t guaranteed
- lots of competition from directories, low margins typically
In Part 2, we’ll go deeper into the actual process of getting signed up with dropshippers and some of the critical things you need to know so that you don’t make huge mistakes.
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