Dropshipping. Described by Wikipedia as a supply chain management method in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
That essentially just means a shop can sell products without having to buy any stock. Because when a customer buys a product, they pay you, and then you pay the dropshipper, and they send the item directly to the customer.
This diagram describes it rather well. All credit to SellerBot.com for that picture.
Dropshipping obviously has many advantages, these include:
- Not having to invest any money in stocking up on items to sell.
- You can sell a wide range of items because you don’t need to store them anywhere.
- And being essentially risk-free.
Just to name a few. The main attraction is the risk-free element. Lots of people see this as an option to make a few extra bucks without doing much work.
But Dropshipping has quickly started to become a very bad idea. Earlier in the 2000s dropshipping companies used to charge very cheap prices for their items, but they all eventually went out of business because they were making a loss, so the suppliers started putting up prices to keep themselves in business. Now dropshipping suppliers are only slightly cheaper than buying directly from a retailer (in some cases anyway). The idea itself is good, and if you are very careful and do lots of research you might just succeed. Now I do not know what it’s like in the US (or any other country for that matter) but in Australia, some of the companies who offer dropshipping services have a few sneaky tricks.
Chinavasion, are a “china wholesaler” which means that they sell Chinese products at so-called wholesale prices. These websites often offer bulk buying options at discounted rates. They also sell individual products at “heavily discounted” prices.
Let’s look at the listing for this Xiaomi Air 13 laptop, the title includes all the important specs and right up the top is a 5-star rating, but that’s only out of a whole one review, which isn’t a very good one at that.
So for the listing, there is a crossed out retail price at the top with the discounted prices below. This format for pricing already makes it seem like a pretty discounted laptop. It’s about 10% off their retail price. But a quick Google search shows how inaccurate that retail price is. The average price (out of 5 different retailers) for the Xiaomi Air 13 is $1,147.94 which is only about $43 more than Chinavasion.
So what’s wrong with that you ask? $43 profit is still pretty good considering you didn’t do any work. There’s the problem. People who want to use dropshipping as just a small side earning thing will probably be using eBay due to its simplicity, and also PayPal because of the payment security so you know you aren’t being scammed. But with both these services come fees and this is where it starts to get expensive.
To be continued in Part 2