What is dropshipping and how does it work

As is normal, in the various situations that life brings us to experience, there are also disadvantages: let's see what those related to dropshipping might be.

The first difficulty that can be encountered during the e-commerce activity developed with the dropshipping method is related to identifying suppliers who can be considered reliable, both in terms of the quality of their products and in terms of professional seriousness, in order to avoid finding oneself with orders managed incorrectly and not punctually, thus risking to market and advertise products that do not offer the qualities they actually possess.

Delivery times, the supplier must guarantee fast delivery times; today, customers will not wait dozens of days to receive the ordered products, as they are accustomed to receiving goods as soon as the next day after the order. The care and shipping times are the first problems encountered even in traditional e-commerce that fail to stand out.

If you are thinking of receiving prepaid orders and then sourcing from China with a single order, or something similar, desist; not only is it prohibited by the consumer code*, but today there is also Alibaba and AliExpress.

*) provided that it is communicated clearly, but you wouldn't sell anything.

Product availability, the supplier must have large quantities of the products you are reselling in stock; it will be difficult for you to have synchronization of quantities almost in real-time; in most cases, you will be able to synchronize this data once a day. To avoid damaging your reputation, it is important to minimize the chances of a customer ordering an unavailable product, and if it happens, to be quick in refunding or proposing an alternative solution.

Withdrawal policy and conformity defects, this is a point to clarify immediately with the supplier: what happens if your customer decides to exercise these rights? Your relationship with the supplier is B2B, thus lacking these protections, so contractually you must have the possibility to return the products that customers return by exercising the right of withdrawal.

SEO problems: it is not easy to stand out without investments in marketing; the price list that is uploaded in most cases is provided by the supplier, which translates into identical product names and descriptions to thousands of other sellers; consequently, we cannot rely on SEO indexing by search engines.

Provided that the product listings are not done manually or curated manually by inserting original descriptions, for Google we will just be one of many duplicate pages, unworthy of presence in the SERP.

Another disadvantage, if it can be defined as such, is the negligible profit, at least initially.

Although management costs are not high, profits initially appear rather low; to explain why, it is good to provide a small example.

If customer X requests a certain product from seller Y, this is ordered from supplier Z, who will ship the item directly to X's address.

X (customer) will pay Y (seller) the amount corresponding to the price of the ordered item; from this amount, Y (seller) will have to deduct the cost of the service provided by Z (supplier).

This means that seller Y will only keep the difference between the selling price (to customer X) and the purchase price (through supplier Z).

So, if the product purchased by X costs 100 euros and Y (seller) bought it, in turn, from (Z) for 80 euros, the seller will only have 20 euros left in cash.

From these 20 euros, seller Y will then have to cover additional management costs: electricity for the operation of the devices used to carry out the e-commerce activity; payment of the fee related to the website, etc.

This means that for managing an e-commerce site, even if the costs are really low, one must engage in marketing activities so that the number of customers relying on that site is always higher, thus allowing for the economic coverage of all expenses, albeit minimal, for the optimal conduct of the activity.

In conclusion, the further negative aspect that can arise from the dropshipping system is related to cyber fraud.

It is not impossible for malicious individuals, posing as sellers, to withhold the payment made by a well-meaning customer, who will never see their order fulfilled.

A few years ago, when the internet was not yet widely used for purchases, some individuals posed as resellers offering products at truly competitive prices, thus attracting several unsuspecting customers into their net, who believed they were saving on the purchase of a product offered at a low cost due to the absence of the typical costs that burden physical stores.

The unsuspecting customers would order the chosen item, advancing a sum of money, for a product that would never be ordered, and thus would never arrive at the user's address.

Thus, the fake seller retained the amount paid by the customer without ever forwarding what the customer had ordered.