What is dropshipping? And why does it matter?

Let’s say you are an ecommerce retailer. You have a webstore which displays many products and your customers browse your selection and place orders. But rather than storing inventory in your warehouse and fulfilling the order from your warehouse, you just route order directly to the manufacturer of a wholesaler, and they ship out the goods from their warehouse directly to the customer. This arrangement, in which you the merchant does not carry inventory, but transfers the orders directly to the manufacturer or a wholesaler is called dropshipping.

The price at which you are selling the item is slightly higher than the price at which the manufacturer of the wholesaler is selling the item, and the difference is your margin. To look at this a different way, you have now become a pure marketer for the product and the price difference is your commission. So you focus on driving traffic and boosting sales conversions, and someone else does the logistics and the inventory management.

Dropshipping is a common practice with ecommerce merchants, small and large. Some merchants carry some of the items in house, but dropship some other items. Some merchants do not carry any inventory at all and dropship 100% of the items listed on their website. My favorite example is that of blinds.com who had $50M revenues in 2009 and is a 100% dropshipping shop.

While they are an extreme example, there are many smaller businesses that rely heavily on dropshipping too.

Dropshipping offers two main benefits –

1. Takes away the hassle of carrying inventory and managing logistics. You basically need to be a great marketer and attract traffic to your website and convert that traffic to sales. Once the sale is completed, the heavy lifting is some one else’s responsibility. So, this can be great for your return on capital because you are no longer tying up cash in inventory.
2. Allows you to increase your product selection without incurring additional inventory costs. In fact, many retailers do a mixed approach with some products carried in house and and other products dropshipped.

In return for these benefits, you are slightly increasing your business complexity. With dropshipping, you need to be on top of every order and keep your supplier and your customer in the loop. Because, even though shipping is some one else’s responsibility, it is your brand that is attached to the transaction. So, if anything goes wrong, the consumer will blame you and not your supplier. So, dropshippers need to streamline their order fulfillment process to ensure smooth flow of information through the entire supply chain.

Now, time for a plug for Ordoro. Ordoro is a web-based order management solution that can nicely integrate dropshipping into your workflow. Ordoro can import orders from different channels – your webstore on Amazon, Shopsite, BigCommerce or from a spreadsheet – and then you can route orders directly to your supplier. Ordoro will automatically notify the supplier via email about what needs to be shipped and to which address. Once the supplier completes the shipment and sends you a trackingnumber, you can update that trackingnumber in Ordoro and Ordoro will automatically notify your customer that the order has been shipped.

Ordoro helps you stay on top of all your dropship requests and ensures that you never miss a shipment. Here is a 1-minute demo of how merchants are using Ordoro to manage the dropshipping in their business

Try out Ordoro for your dropshipping needs and see how it improves your performance. We offer a 15-day free trial, and the set up takes less than 5 minutes. Got questions? Call us at 512.981.7309 or email us at info@ordoro.com