What is the Dropshipping Supply Chain Process?
What is the process in dropshipping? How does dropshipping actually work?
The thing to remember here is that your job title is not actually dropshipper. It is Retailer. Dropshipping is just a part of the process.
You don’t need to be an expert when it comes to supply chain management or even know how to run a business (you can learn the basics), but you do need to focus on customer relationships and sales.
Your role in the dropshipping process is to advertise products and source customers (ideally return ones).
The short process looks like this:
It is important to remember that you are just a part of the supply chain process. There is a whole chain of activity before and after you in the process.
For this chain to work you need to build a strong relationship with a reputable manufacturer, and maintain good communication with your customers. Social media and keyboard warriors mean it is all to easy to be given negative reviews by one person and have it ruin your online reputation.
The full supply chain process looks like this:
Something to keep in mind that there is a small difference between manufacturers and suppliers (though they can be one and the same).
Manufacturers are the creators of the product, they often create goods in bulk because it is cheaper for them to make an item in large numbers.
Suppliers (and wholesalers) buy from manufacturers and sell the product to their customers (retail).
You, the retailer, then can either:
- buy the products in bulk and pay up front; or
- advertise the product on your online channels, and push through orders as they come through (pay only when sold)
The advantage to Option B is that you are not holding stock. There is no risk to you if an item doesn’t sell. You can simply remove it from your online stores and advertise a different item.
The reason retailers tend to go through suppliers and wholesalers, is that manufacturers tend to want you to purchase bulk orders and hold the stock yourself. So it is better generally speaking, to go through Suppliers.
However, there are small creative manufacturers who make bespoke items or more expensive items, who you can go into agreements with and advertise on their behalf.
Benefits to going through suppliers such as Oberlo and Modalyst is that you have a wider range of products to choose from, and they manage most of the process behind the scenes.
Looking at the Process as a Customer
To be a successful retailer, you need to look at your business from the eyes of a customer.
We’ve all brought things online before, and I can almost guarantee that you would have had no idea if your product was sold via the dropshipping method or not.
To create the ideal experience, you should order test products via your supplier channel. Use this test to check for quality, speed and packaging. You need to see how the customer receives a product in order to be able to sell it.
If there are any issues with the packaging and quality of the product, this is your chance to address it.
Then look at your website and chosen advertising streams. Are they seamless, not intrusive, easy to understand and navigate? Everything from the layout, colours, font and logo.
It is hard to create an ‘enjoyable’ experience online, but you can create a seamless one.
Think of it like self-check out but without the annoying beeping and ‘unexpected item in the bagging area’ alert.
You are the only part of the process the customer is aware of. They don’t know who your supplier is or where it is being shipped from. They don’t care. All they want is the item they ordered to arrive as fast as possible, in the condition they ordered it in.
Ideally, your supplier should be printing your store name on the invoice and packing slip. You want to check this in your test order as well.
The Shipping Process
While most of the process is automated, you still have an important role to play in maintaining communication and expectations. Remember you are the sole face of the sale as far as the customer is concerned.
So there you have it! Hopefully this explained the process of dropshipping to you in a way that is easy to understand.
Continue reading to find out the other steps necessary to set up a dropshipping business of your own.