Dropshipping with Shopify: here’s how it works by Linda Blijenberg
What is dropshipping?
Dropshipping is a fulfilment method with which online entrepreneurs run fewer financial risks than with other fulfilment methods. The usual fulfilment method generally works like this: you buy your products with one party and store them with another party, who takes care of packaging and shipping your orders (and who sometimes even take care of your returns). As the buyer, you are the risk-taking party: everything that does not get sold will be on you.
With dropshipping you don't take this risk. You only pay for the stuff that gets sold. The dropshipper is the risk-taking party in this model: they handle buying (or even manufacturing), storing, and shipping the products in your store. As the webshop owner, you are the intermediary. You get a commission on every product you sell for the dropshipper, as it were.
Pros and cons of dropshipping
Dropshipping has a few major advantages, but also some drawbacks. We listed them below:
Advantages of dropshipping
- You won't need storage space You don't run any buyer's risks
- You can offer a much greater range of products
- You won't have to handle packaging and shipping of your orders
- Your initial investment is really low
- Not having to keep track of your inventory is a big time saver
- Many dropshippers also offer to handle your returns
- To run your own dropshipping business, you need nothing more than a laptop, a phone, an internet connection, and a minimal monthly investment.
Drawbacks of dropshipping
- Your margins are small, due to the competition
- You're dependent on your dropshipper with regard to product availability
- Integrating your dropshipper's inventory management into your webshop is often tricky, meaning you sometimes sell products that actually aren't in stock
- If you work with multiple dropshippers it is difficult to keep shipping costs manageable
- Depending on how you set it up, it's possible you won't ever get to see your product When your dropshipper is on the other side of the world, returns are a problem
- Customer service might take up quite a lot of time
- When your dropshipper screws up, you will have to take the blame towards the customer
Dropshipping with Shopify
At CODE, dropshipping appeared on our radar because of Shopify, the platform we use to build webshops. There are various success stories circulating about dropshipping webshops, for example in the webinar below:
Of course we were curious to see if this worked, so in between projects we set up a dropshipping webshop of our own (want to have a look? Check www.holydazzle.com!). It really is incredibly simple: via the Oberlo app, Shopify connects directly to the thousands of products offered by Chinese giant AliExpress. You can add themto your webshop with a single click, and all orders are executed without you having to do anything!
But we have some critical notes as well. It feels a bit weird to sell products you've never seen yourself, for instance. And even weirder to offer customer service to clients all over the globe, who have questions about that product. Also, we noticed that returns are an issue. Customers have to send their returns all the way to China, which often costs more than the product they're shipping back. Of course the customer isn't going to pay for that, so you'll have to think of something to solve this.
Dropshipping according to CODE
At CODE we see some room for improvement, therefore. We would advice anybody to sell something they have affinity with, for instance. Otherwise it won't motivate you anymore at some point. And of course it helps a lot if you know your product well. You miss out on that with the Oberlo-AliExpress construction, in which your dropshippers are in China. Finally, we think this hassle with intercontinental returns isn't going to make anybody happy.
That's why we say: look for Dutch dropshippers! To our surprise we found quite a lot of those, even though it is a bit of a search. Many dropshippers are hard to find online, and they often have hopelessly outdated websites. But if you find a good one, the easy accessibility is a big benefit. A good alternative approach is to contact a wholesaler and ask them if they would consider a partnership with you.
Another tip: we would advice you to contact dropshippers first, so before you start setting up your Shopify webshop. Dropshippers know their market and often have useful information and tips, which will help you to set up your webshop well. To get you started, we collected some Dutch dropshippers for you here. There might be something for you in the list.
- Skinfashion (underwear)
- Koffie Unie (coffee)
- Vince Design (furniture)
- Kokoon (design furniture)
- Sieraden-Nederland (jewelry)
- Actiepartner (electronics and appliances)
- Lamazi (shoes)
Obviously, in this Dutch construction you lack the ease of use of Oberlo, because this app isn't connected to any Dutch dropshippers. If your webshop is quite large or time-consuming, however, we can imagine you would want something similar. In case you're interested: CODE would love to build it for you. A connection between your Dutch dropshipper and your Shopify webshop, with the same ease of use as Oberlo: that's what we call a nice project!