Trading by DropShipping facilitates founders and prospective entrepreneurs from a whole range of financial obligations, costs and work steps. Instead of having to purchase and pre-finance sales products themselves in advance, they are left with the respective supplier and, in the case of orders, sent directly from there to the end customer.
DropShipping entrepreneurs therefore do not need any special start-up capital, their own warehouse or corresponding logistics personnel. In addition, they have sufficient time in their daily work to take care of their assortment, customers and the marketing of their products. The start as a DropShipper is much easier than in comparable classic online trading. But here, too, certain rules, steps and sequences must be followed in order to optimize the prospects of success and reduce the risk of failure.
Experience with products when starting with DropShipping advantageous
As in any other business area, the planning and preparation phase begins with the development of an exciting business idea. In this, above all, it is determined which products are to be sold to which target groups. It has proven itself in practice when prospective entrepreneurs focus on their own interests, skills, knowledge or hobbies when deciding on a particular sales area. This facilitates long-term motivation and also helps to make the right decisions with regard to the product range and the needs of the customers.
Positive experiences with DropShipping: The Webshop finally athause.de
In the online shop of the successful entrepreneur Alexander Hupe, the name says it all. Under www.endlichzuhause.de the hobby web designer and leisure programmer offers his fast-growing clientele a wide range of products around a beautiful home, a hospitable table and a functional kitchen. The retail concept was already launched in 2005, when it was still purely a hobby project. The company has only been operating full-time since 2007.
During the first two years, the trading volume doubled. Today, the company supplies its customers with around 4,000 different articles. Access to the wide product range is via a clear and transparent navigation system. The customer first selects between the themes “Table and Table”, “Beautiful Living”, “Modern Kitchen” and “Gifts” in order to enter the more detailed shopping worlds. The most popular categories are tableware, cutlery, vases, pots, pans and woks.
DropShipping: The experiences of entrepreneur Alexander Hupe
From the very beginning, Alexander Hupe’s requirements in terms of warehousing and dispatch logistics were a particular burden. As there was not enough storage space available, the individual products were usually only ordered from the respective suppliers after the end customer had placed the order. This led to long delivery times, which modern consumers are no longer willing to accept today. Incoming shipments were also packed and prepared for dispatch by the company itself, which led to some night shifts and weekends.
In order to create the prerequisites for further healthy growth and at the same time reduce the burden of manual logistics, the entrepreneur decided to introduce a drop shipping concept in 2008. Alexander Hupe talks about his beginnings in online trading and his experiences with drop shipping.
1. since when does your company exist?
DropShipping entrepreneur Alexander HupeWe started as a hobby project in 2005 and have been working as a “full-time company” since 2007.
2 How did you come up with the idea of opening a crockery and cutlery shop?
hornI have always been interested in stylish websites, how to present products visually. As a hobby web designer and programmer, I have already set up and maintained one or the other shop “by the way”. Some of them became quite successful over time – so why not do it yourself?
However, I knew one thing: I never wanted to sell articles with a net cord – already in 2005 there was a total price war on the Internet. There was actually a shop to the topic house and living exactly the right thing. The prices were still relatively o.k. and difficult to compare and one could create a nice, appealing shop with suitable pictures. In my search for decoration articles I ended up at the wholesaler Ritzenhoff&Breker. In the end, tableware became the main category, probably because it was the absolute niche at the time.
3. did DropShipping play a role from the beginning and how did you decide to sell your goods via DropShipping?
horn: In the beginning we packed ourselves. That was very elaborate. We needed a lot of packaging material, fillers, a ramp for pallets, shelves, lift trucks and so on and so forth. We usually only ordered the goods after they had been ordered by customers; we had no room for proper storage at all. One problem with this process was a delivery time of at least one week. I think that would no longer be acceptable to most of our customers today.
4. please describe your career so far.
hornIn the first 1-2 years that we were packing ourselves, we built up a better and better relationship with the wholesale trade. He saw that we grew continuously and were reliable partners. At some point we were invited to a conversation, and we were offered drop shipping. At that time we had about 1000 articles in our assortment and developed really fast. I still think back full of horror to the pre-Christmas time 2007. At this point we were at the end of our capacity. On 23.12. we packed until midnight and filled another truck in the morning on Christmas Eve. This should be our last self-packing season.
At the beginning of 2008, a 4-month development period began at the interface. From May 2008 we ship exclusively by DropShipping. Our growth is not quite as rapid as in the first two years (we have doubled in each of these), but we still manage 20-30% annually. Currently we have approx. 4000 articles in our assortment.
5 What do you see as the advantages of DropShipping?
hornThere are several advantages. On the one hand, the lack of warehousing avoids a capital commitment that should not be underestimated. We also save resources such as storage space, packaging materials, packaging technology and, of course, personnel. Since our wholesale is well staffed, orders can be processed well even at peak times (such as Christmas business). Since the wholesale trade often already has good contracts with logisticians, it is usually possible to ship quite cheaply via this rail – the handling costs are thus partly amortized.
6. do you see any disadvantages in drop shipping?
hornDefinitely. An immense technical effort is required to map all logistical steps automatically in the respective merchandise management system. Order processing should be as transparent as possible for the customer. In order to make correct statements to the customer hotline, you constantly need a current processing status. What about arrears, what’s the package number? Is the merchandise out yet? One or two packages? Is the return back yet? The difficulty with the connection to the existing enterprise resource planning system is often the partly outdated or proprietary software in the classical wholesale trade or lack of interfaces.
A further disadvantage is the dependence on the DropShipping supplier. It is said that after a while he opened his own (manufacturer’s) shop and thus competed with the DropShipper from his own house. Here a certain amount of trust or contractual coordination is necessary. If several DropShipping suppliers are used, there may be overlaps within one order. This results in multiple handling and postage costs per order. This is not always economical.
7. do you purchase your products from one or more DropShipping suppliers?
hornMeanwhile from several.
8. what are your experiences regarding delivery capability and delivery time in the DropShipping trade?
hornWe are really satisfied with that, we often have a 24h shipment, which we could not guarantee ourselves.
9. how do you handle revocations from your customers? Will the goods be taken back by your supplier?
hornYes. Each parcel contains a return sticker with our c/o address recipient at the wholesaler. There the goods are stored again and we receive a credit note minus a return handling fee. The feedback will then be sent by fax and we will issue the customer credit note. This process is very cumbersome, but fortunately our returns are limited.
10. what goals have you set yourself for the future and what tips can you give from your experience in drop shipping?
hornWe switched to a new merchandise management system last autumn in order to better automate the normal standard processes. To a large extent, we have already succeeded in this – now it is time to put the finishing touches to it. The next goal is to expand the product range, and initial discussions have already taken place here.
From my experience the introduction of a DropShipping system at the wholesale trade is a not to be underestimated expenditure. The underlying processes often differ greatly. Therefore, I can only advise new shop operators to be patient and, in case of doubt, to carry out the shipping themselves. You also get a feeling for the goods you are sending and can answer customer questions more competently. If the sales figures increase, the shipping system can still be switched to DropShipping.
You can learn a lot by looking at the stories of successful online retailers. Every DropShipper has to fulfill one requirement: One own online shop for DropShipping I’ve got to go. You can find out how to create this without any problems in our guide.