Dropshipping as a retail activity

Drop shipping is a type of retail business where a dealer markets products on behalf of a supplier but is not responsible for making deliveries. An online retailer lists products and services on his or her website; buyers place orders there, and the retailer subsequently orders the same product from the supplier, who then ships it to the client. When a customer is interested in a product, they can make an order from the merchant's website. The dropshipper then sends the supplier the order details following the placement of the order. Although the dropshipping business model has been around since 1999, recent technological advancements and mobile phone applications have rekindled interest in the strategy (Slimas, 2017). Amazon uses this approach as a primary strategy in inventory management. Since there is no need to manage inventory, dropshippers have an opportunity tap new customers.

Characteristics of Dropshipping

Dropshippers are not bound by retail prices and they control their own margin. They do not need to establish business entities before establishing online stores. Dropshipping is streamlined when the merchant decides to host their ecommerce shops using online applications, which allows them to act as the link between potential customer and seller. The application allows merchants to import products directly from the supplier into the store and manage changes in inventory so that chances of discrepancies are minimized. Majority of retailers involved in drop shipping make profit from the difference between the retail price and the supplier’s price. In some cases, drop shippers earn a certain percentage of the sale, which is paid by the wholesaler.

Dropshipping takes place when a retailer sells small quantities of goods to the public and gets a large order. Although this enterprise is a controversial activity in online auction-partly because platforms like eBay demand that sellers own the products before marketing- it is increasingly being accepted as long as the merchant can guarantee customer satisfaction. However, some customers after purchasing the product will realize that it has been overpaid and therefore return it to the supplier and order for an identical item. As a result, the manufacturer experiences losses from processing the return. A contemporary practice in drop shipping is the use of private labels, such as logos and pictures, where the supplier makes tailored items for the retailer.

Dropshipping service is characterized by low overhead expenses. The merchant is not involved in the purchase of inventory and management of warehouse. The flexible nature of managing a drop ship business allows merchants to run operations at the comfort of their home or offices, using only a computer that can access internet. As long as the dropshipper can maintain effective communication with the customer and supplier, running the retail is much easier. Although the expenses will likely increase as the business grows, the expenses will still be low compared to traditional retail business. Also, there is a wide range of goods for the customers to choose from. One can present an array of goods since there is no need of making purchases. When suppliers stock items, drop shipper can list them in their website without incurring any additional costs.

Benefits of dropshipping service

Increased use of mobile phones and internet to conduct business transactions makes this product worthwhile. There is less capital required to launch a store. Previously, retailers were expected to invest huge amount of dollars to purchase inventory, but with Dropshipping service, the company eliminates the need to spend money in inventory up front. The merchant does not have to buy the goods unless the customer has agreed to pay him/her for the products. Given that the merchant does not deal with physical goods, it is easy to start and operate Dropshipping enterprise. There is no need to worry about storage space, packing and shipping, tracking of inventory for accounting purposes. Furthermore, trouble associated with handling of returns, damaged goods, inbound shipments and management of stock levels is eliminated.

Dropshipping allows the dealer to leverage suppliers and therefore lessens work. In the traditional approach, the merchant must do a lot of work processing additional orders, which meant increased work and fewer opportunities for growth. By utilizing drop-shipping, businesses scale better than traditional ecommerce. Drop shipment places middlemen between the buyer and the seller therefore preserving the role of middlepersons. It prevents direct interaction and communication between the supplier and the final buyer without requiring the middleperson to bear costs bad risks involved in repacking relabeling. Also, it leads to positive cash flow cycle given that the seller is only paid when the purchase has been made.

Audience profile

Online market is filled with millions of shopper who purchase goods and services every day. Dropshipping appeals to both consumers and business, with a large percentage being the youth. Since dropshippers are not the manufacturer of the products, there is a wide range of products to satisfy the needs of the young people, elderly, children and business organizations. According to Cetinkaya (2014), the best practice is to categorize products either as suitable for consumers or businesses. For example, a mosaic art can be categorized as consumer product while an office chair can be regarded as business category. This will help people visiting the website access goods easily without having to sort product type for themselves.

Current understanding is that women are the major shopping force. According to Smit (2015), women make up more than 80 percent of household expenditure, although the number reduces when it comes to online shopping. Men are more likely to purchase goods and services using mobile applications. This suggests that dropshippers can greatly attract men by ensuring a smooth and flexible mobile application. The key age gap for online commerce ranges from 18 to 34 years, spending nearly $ 2 0000 per year on ecommerce. Despite having lower income than older buyers, the argument is that dropshippers should focus on products that appeal to buyers within this range. However current trend indicates that seniors have also adapted mobile applications. More than 55% of ecommerce shoppers have income above $ 75 000 which shows online shoppers live in households with higher income (Smit, 2015).

Online shoppers tend to be influenced by convenience and flexibility of purchasing product online. This is a significant characteristic that can greatly influence how customers respond to items posted by dropshippers. It is therefore important that a mobile website option is available to people whose mobile devices have features have needed to access the website. The online store needs to be created for all users, regardless of the operating system they are using. It should have responsive templates and functionalities that work from anywhere. The design should further be flexible for all screen sizes and devices. The demands of online shoppers can be overpowering, they should therefore be able to access all features using their mobile devices just like on their PC.

How to establish credibility

For buyers to make purchase decisions, dropshippers must establish creditably of the business. The buyer must trust in the dropshippers to provide what is being promised. There are several ways of communicating to customers and ensure there is trust ad credibility. One way is by Building a personal relationship. According to Friend (2015), a personal approach to customer service goes a long way in building a powerful customer base, trust and satisfaction. Dropshippers must foster personnel relationship with customers by helping in decision making, offering product reviews and recommendations. However, the relationships must be built on realistic promises. Another way of establishing credibility is trough social media. It not only helps bring the business to potential customers in remote places, but also reflects the dropshippers commitment to customer relationships. Facebook and Twitter can be a great source of online feedback about the company.

Channels of communication

For efficient interaction between dropshipper and customers, email and social media channels should be used. Email is an important digital strategy for communicating information that is not bound by time such as sign up, confirmations, order and receipts. It allows dropshippers to construct personalized communication with a lot of success. It has flexibility features that allow one to incorporate images, attach documents and provide useful links. However, email cannot be used for urgent needs given that it may take more than a day for the recipient to reply. Social media on the other hand is the best channel for monitoring and engaging internet users. Twitter –provides an open functionality for customers to interact directly with dropshipper to send and receive short messages. Unlike email where messages can be personalized, Twitter comments and replies can be publicly viewed. According to Nanji (2017), these two are exceptional channels for providing return on investments. A lot of consumers use email every day, making it a channel with a wide distribution. Both channels can reach a wide audience and can be used out of marketing context to serve other purpose such as customer services, communication and promotion. Dropshipper will constantly monitor emails and social media messages and provide support.

References

Friend, Bonnie (2015). How to establish credibility as a quality Service Provider. Blur Blog. Retrieved from https://www.blurgroup.com/blogs/group/how-to-establish-credibility-as-a-quality-service-provider/

Nanji, Ayaz (2017). Which Digital Channels Deliver the Best ROI?. Available at https://www.marketingprofs.com/charts/2017/32189/which-digital-channels-deliver-the-best-roi

Slimas, Tomas (2017). What Is Dropshipping? It’s the Easiest Way to Start an Online Business. Retrieved from https://www.oberlo.com/blog/why-you-should-care-about-aliexpress-dropshipping/#What_Is_Dropshipping_How_Dropshipping_Works

Smit, Cooper. (2015). The surprising facts about who shops online and on mobile. Business Insider. Retrieved from http://www.businessinsider.com/the-surprising-demographics-of-who-shops-online-and-on-mobile-2014-6?IR=T