Definition and How Dropshipping Works

Definition and How Dropshipping Works

For those of you who are used to selling goods online, you must be familiar with the term dropship. However, those of you who are new to online business may be a little confused about what dropshipping is, let alone how it works.

Well, for those of you who are new to online trading, it would be nice to know how dropshipping works and its advantages and disadvantages. Besides being able to add knowledge, implementing a dropshipping system in an online business is also a smart and profitable choice, especially for those of you who have limited capital for business.

Definition Dropshipping 

Definition and How Dropshipping Works

The notion of dropshipping is one of the methods of selling online where the seller leaves the packaging and product delivery process entirely to the supplier.

So in dropshipping, the seller is only tasked with marketing the product to consumers. After there is a transaction agreement, the supplier is in charge of packaging and sending the product to the consumer according to the seller's request.

In most dropshipping transactions, the seller only pays money to the supplier after the goods are received by the buyer. But sometimes there are also sellers who pay the supplier immediately after delivery of the goods.

For people or subjects who market products by dropshipping, we call them a dropshipper.

How Dropshipping Works

Definition and How Dropshipping Works

In online sales by means of dropshipping, there are 3 interrelated parties, namely sellers or dropshippers, suppliers, and buyers.

Sellers will be connected directly to suppliers and buyers. The relationship between the seller and the buyer is during the buying and selling transaction process. Meanwhile, the relationship between the seller and the supplier is in the process of requesting goods needed by the buyer.

For suppliers and buyers, there is no direct relationship or contact. The supplier's job is only to send products to consumers and must not show their identity to the buyer.

Dropship Workflow

To be clear, this is a dropshipping workflow.

Sellers market goods online only by relying on product photos without buying goods from the supplier first.

The buyer buys goods from the seller, sends an amount of money and provides the seller with the delivery destination address.

The seller contacts the supplier and requests delivery of the product requested by the buyer and provides the buyer's address to the supplier.

The supplier packages and sends the product to the buyer according to the address on behalf of the seller as the sender.

The buyer informs the seller that the goods have been received properly without any shortcomings or complaints.

The seller pays money to the supplier according to the agreed transaction price.

Difference between Dropship and Reseller

Many think that dropship and reseller are the same. In fact, these two things are very different. The difference between the two can be in terms of stock of goods, venture capital, risk, profit, and marketing.

Advantages of Dropshipping System Online Sales

Online sales with a dropshipping system provide online merchants with many advantages, including the following.

  1. No Capital Required
  2. There is no risk of unsold product or stockpiling of goods
  3. No Need to Package and Ship Products

Disadvantages of Dropshipping System Online Sales

Even though it has several interesting strength points, it turns out that sales with the dropshipping system also have several drawbacks and weaknesses, including the following.

  1. Weak in Quality Control or Quality
  2. Prone to Getting Complaints from Buyers
  3. Profits Cannot Be Too Big

Hopefully the discussion about the flow and how dropshipping works along with its advantages and disadvantages can help you understand what dropshipping is before plunging into selling online.

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