DropShipping has long since become the focus of the e-commerce start-up scene and has a lot to offer prospective entrepreneurs. A decisive advantage of DropShipping is that this trading model can be used to create huge assortments without increasing costs. But is it really advisable to design the delivery programmes as extensively as possible or is it better to hold back here? We answer these and other questions in connection with the assortment development of DropShipping shops.
DropShipping is now a must for e-commerce founders
Anyone who is currently working on the plan to set up their own company will definitely come across the topic of e-commerce. It is simply too tempting to become self-employed in this field. The growth rates in online trading are still very good. And even if the industry is no longer regarded by some as particularly advantageous, it is far from being any form of saturation.
In addition, e-commerce does not pose any particular hurdles for budding entrepreneurs. An own web shop can be opened and operated without specific knowledge and with little effort within a short period of time. The first revenues appear after a short time and if there is still a lack of customers at the beginning, then you can either place on marketplaces like Amazon, or drive the business through Google Ads. So even beginners can quickly build up a functioning company and take manageable risks.
Today, the necessary infrastructure is also available at very favourable conditions. Actually you don’t need more than a computer and a simple shop software. Even the areas of marketing and search engine optimization are no longer a book with seven seals. The World Wide Web offers lots of instructions and understandable information, so that even individuals can access tools similar to those used by large e-commerce companies.
However, anyone who deals with the topic of online trading today can no longer ignore the DropShipping trading model. The special system has become quite well known in the meantime and convinces many founders by its clear advantages. We’ll take a closer look at what these are in detail in the next section.
Overview of the advantages and disadvantages of DropShipping
In a nutshell, one could say that DropShipping includes all the advantages of e-commerce and also convinces with its own advantages. These are specific and result from the basic characteristics of the trading model. Drop shipping is the term used when the retailer himself is not responsible for the storage and shipping of his products. With DropShipping, this is simply done by the respective supplier. He sends the goods directly to the end customer after receipt of the order. The advantages of this are more or less obvious:
– Almost no start-up costs
– Very low running costs
– Good risk profile
– Special advantages when trading heavy products
– More time for marketing and customer care
– Unlimited assortments
The fact that we at DropShipping have to deal with significantly reduced start-up costs is mainly due to the fact that no goods have to be purchased in advance. This not only eliminates high expenses, but also the entire merchandise risk. Directly connected with this is the effect that neither warehouses nor warehouse personnel are required. This saves high running costs and thus ensures a particularly advantageous risk profile overall. Even if a drop shipping company does not run to the satisfaction of its founder and has to be closed prematurely, it does not necessarily incur high debts.
DropShipping dealers who deal in large and/or bulky products enjoy special advantages. In such cases, classic online merchants have to pay the shipping costs twice. Once from the manufacturer or wholesaler to our own warehouse and once from our own warehouse to the customer. Since the supplier ships directly to the end customer for the DropShipping dealer, there is only one shipping transaction. And this makes a difference when it comes to heavy or bulky goods.
DropShippers do not have to deal with the small-step handling of shipping processes and save a lot of time in this way. This time can be optimally invested in committed marketing and comprehensive customer care. This strengthens its own business model and gives it a clear edge over its competitors. Last but not least, DropShipping dealers have the option of building up almost any size assortment. Since the goods on offer do not have to be purchased in advance, larger delivery programmes do not automatically lead to higher costs.
Where there’s light, there’s shadow.
This is not intended to be a one-sided view. Therefore, we now turn to the disadvantages that drop shipping dealers face in comparison to those already mentioned.
– Possibly worse purchasing conditions
– Individual return concepts required
– Dependence on certain suppliers
– Risk of too extensive and too broad assortments
The first disadvantage concerns purchasing costs. The problem here is that the classic retailer usually buys a certain volume at the same time, while the drop shipping retailer only buys one product at a time. This disadvantage must be negotiated offensively with the individual suppliers so that it is not too severe. In addition, the DropShipping dealers need special concepts when it comes to returns. Here it must be answered to whom returns are to be sent and who then takes care of the returned goods. This is particularly difficult if the returned consignment contained goods from different suppliers.
Speaking of suppliers: Drop shipping can lead to increased dependence on individual wholesalers or manufacturers. Although there are many suppliers offering drop shipping today, the offer cannot be compared with the suppliers of the classic trade. As a result, it can sometimes happen that individual products are only available from a single supplier, which leads to a certain dependency.
Last but not least, we are faced with a risk related to the size of the product range. We are aware that this appears both among the advantages and among the disadvantages. The reason for this is simple: large assortments can be both a curse and a blessing. In the following, we will now take a closer look at the optimum size of the product range and provide you with valuable background information.
Why does DropShipping affect the assortment size?
The connection between DropShipping and assortment size is obvious, the classic online retailer will also stock every product he has in his product range. This leads to purchasing costs on the one hand and storage costs on the other. Apart from that, no one can assure him that he will really sell the product successfully. He alone thus bears the full risk of the goods. Against this background, he will of course always consider very carefully whether to really include a new product in his product range or not.
The DropShipping dealer has it much easier here. For him, the expense of products in the assortment is only limited to placing the article in his shop system. He does not have to buy it in advance or provide sufficient storage space. In addition, it is economically irrelevant to him whether the product is actually sold in the end or not. As a result, the DropShipping retailer can build up much larger product ranges than his classic colleague.
Is it really true here that the bigger the better?
One could assume that it is very advantageous to offer a really huge assortment. After all, this way you always have the right product in the shop for every taste and every need. We all know the following problem from the stationary trade: We visit a shop because we are interested in a certain product and cannot find it there. So it goes without saying that we turn to another shop. On the Internet it’s the same. If your visitor does not discover the product he was looking for, he will turn to another retailer.
But does this phenomenon really speak for the fact that we build up assortments of any size in order to be able to offer each of our visitors the right product at all times? The next section clarifies this question.
Convincing reasons for a manageable assortment
There is a lot to be said against allowing assortments to grow indefinitely. First of all, a really large assortment quickly becomes confusing. Imagine a huge shop in the city with countless products. Here the risk is very high that the customer simply overlooks certain articles. And while in a stationary shop a salesman is ready to show us the way to a certain article in case of need, in a web shop everything has to be done by the shop software.
In addition, customers will only remember us if they associate us with a particular type of product. We remember exactly the beautiful shoe shop on the corner, the great watch shop with the high-quality automatic watches or the shop for decoration products, which correspond exactly to our taste. On the other hand, we hardly remember a large department store in which there is more or less everything. But in order to win regular customers, it is precisely this ability to remember that counts.
So we can see: There are at least two good reasons for not creating unlimited product ranges with drop shipping. On the one hand our shop quickly becomes confusing and on the other hand it does not have enough profile at the end to be reminded by our customers.
With these tips you will be able to build up the optimum range of products
The development and maintenance of an independent and convincing product range is one of the tasks of freshly baked retailers who are very much underestimated. Many entrepreneurs do not sufficiently address this issue. They assume that the product range will develop more or less by itself.
Which is overlooked in this assessment: The assortment of a web shop is one of the decisive success factors. Only if the product range is convincing can a sufficiently large number of customers be found and regular customers be developed. For this reason each dealer should deal intensively with this area. This is especially true for DropShippers, as they tend to create too broad a range of products due to the design of the trading model.
The following tips support you as a newcomer in building up sales-boosting product ranges and are also a valuable and effective support for established dealers.
Develop a clear business idea
Every company is based on a very concrete business idea. Unfortunately, many founders of e-commerce restrict themselves to considering online commerce as a business concept itself. However, this is not a real business idea, but merely a description of the central distribution channel. In addition, the business idea must at least define which products are to be sold to which target group and what reasons are offered to this target group to decide in favour of these offers.
Start developing your own business idea early enough and let your interests and knowledge guide you. A firmly anchored business idea also directly creates the corridor for your future product range and prevents you from relying on a delivery programme that is too extensive and therefore indefinable.
The red thread for potential customers
Some online shops offer their visitors and customers a real chaos of products. Here one feels like in a local bargain market. Nothing fits together, the individual products are not coordinated with each other and as a potential customer one could never say what the virtual or real business actually stands for. This is particularly important if you as a dealer value regular customers. They must be able to remember clearly which products you offer. Otherwise it will not come in the next need situation to the fact that one remembers your shop and visits you again.
Try with your assortment to offer the visitors and customers a red thread. Show very clearly and clearly which topic your shop is dealing with. Develop the awareness of a specialist shop that stands for very specific articles and that is frequently visited by its customers when they are looking for a specific product.
Your professional competence is in demand
E-commerce and its widespread use have led to very strong competition for founders and entrepreneurs in this area today. Depending on the product range, this may be slightly larger or slightly smaller. Here it is urgently necessary to distinguish oneself from the competition. An excellent opportunity is to offer customers a particularly high-quality service. One recognizes this today above all by an expert consultation. It is therefore urgently necessary that the shop operator knows his products very well. This can be seen, for example, in the product descriptions, any existing purchasing guides or in the reactions to questions and complaints.
As a dealer in this field, you should make every effort to ensure that you have the appropriate competence. In practice, this requirement alone will result in the product range remaining within certain limits. Otherwise, it would soon no longer be possible to be really familiar with all the products on offer.
Intelligent reduction of the assortment again and again
In the everyday life of an online retailer, the focus on the assortment plays an important role. Here you are actually constantly on the lookout for new product ideas, constantly making contacts with interesting suppliers, looking around at the competition or visiting trade fairs and exhibitions in order to become aware of innovative developments. In the course of this occupation it naturally happens again and again that the assortment is enlarged. However, as a DropShipping retailer, you often fail not to part with products at the same time. After all, large delivery programs are not associated with costs in drop shipping.
Even if there are no direct economic reasons for this: As a DropShipping dealer, you should regularly remove products from your product range. For example, set yourself a maximum in terms of assortment size and make sure you adhere to it exactly.
If in doubt, open more shops
If you look around in different DropShipping shops, you will notice again and again that the assortments become simply too large in the course of time. And it is not only the depth of the range that makes itself felt here. The delivery programmes also often grow in breadth and thus cover more and more topics and areas. Such a development often results from contacts to new suppliers whose products one would like to include in the assortment. In the course of time, the delivery program becomes more and more confusing for visitors and customers. As a result, a buyer does not remember you and your shop after a short time because you are not associated with a certain topic.
If you attach great importance to trading many different products, then you should think about simply opening several DropShipping shops. In this way you can create large product ranges and offer your visitors and customers a lot of orientation at the same time.
Whether you opt for a large and broad assortment or for a small number of products in your shop, as a DropShipping retailer you always have to struggle with one aspect – returns. Since you do not store the goods yourself, returns can become a major problem. How to get this under control and how to prevent returns from becoming a problem in the first place, you will learn in this article.
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.(tagsToTranslate)DropShipping Assortments Shops E-Commerce Trading Model Delivery Program Assortment Development Success
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