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How To Make Dropshipping Work For Retailers


Amit Basu is the Founder & CEO of Artisan Furniture, London. He is an LSE alumnus with two decades’ experience in supply chain management.

Storing inventory used to be a necessary part of a retailer’s life, but times have changed. During the pandemic, lockdowns led to shuttered stores and the high cost of holding stock became an issue. For these reasons, some retailers may be exploring dropshipping.

Dropshipping allows retailers to do away with the expense and complexity of holding stock. That onerous job is left to their partners and/or wholesalers that deal directly with customer orders and deliveries. It takes one step out of the supply chain and can make the flow of goods more efficient from both a time and profit perspective.

According to data provider Statista, in 2020, the estimated value of the global market for dropshipping e-commerce was $128.6 billion. Between 2021 and 2026, that market is expected to grow to more than $475 billion.

My company is a dropshipping and wholesale supplier to the furniture trade, and I have been spearheading this supply chain method since 1995—first as a manufacturer-exporter and subsequently as a British dropship/wholesale e-commerce entity since 2010. Based on my experience in the space, I have a few insights to share for retailers interested in leveraging dropshipping.

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How does dropshipping work?

Some retailers—particularly those with a big proportion of online sales—are realizing that dealing with reliable dropshippers can be a helpful way to minimize risk and cut operating costs. I’ve found dropshipping can be convenient and practical for retailers that don’t want the hassle of handling ordered goods but want peace of mind that those products will be delivered, on time and in good condition, directly to their customers by a partner company.

The process works something like this:

• The retailer agrees that certain products can be supplied by a vetted dropshipper.

• The dropshipper holds the relevant inventory.

• A customer orders an item from the retailer’s e-commerce site.

• The payment is processed and the order is forwarded to the dropshipper.

• The order is prepared and shipped.

• The logistics partner informs the end consumer about the product arrival day and date.

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In the best-case scenario, the customer is oblivious that a third party is involved because the process runs smoothly and without any hitches. However, in these times of supply chain disruption—in large part due to demand exceeding supply during the pandemic recovery—delays are commonplace.

This can lead to customer dissatisfaction, so it is vital that retailers choose their dropshipping suppliers carefully and have confidence that their procedures and their partner’s procedures are good enough to cope.

How can you provide a positive customer experience?

To successfully cope with such supply chain challenges and ensure robust procedures, keep an eye on vital parameters and explore your options for improving the customer experience. For example, integrated logistics solutions, either through in-house technology and infrastructure expertise or external collaborations, could help with successful last-mile delivery.

You should also consider the platform you’re using. Amazon, for instance, has strict rules about “sellers of record.” The company said, “If the shipment does not identify you as the seller of record or if anyone other than you (including the other online retailer) appears on packing slips, invoices, or external packaging, it is strictly prohibited without exception.” Alibaba offers a trade assurance policy to protect online orders when payment is made through its website, and Shopify allows you to create your own dropshipping store on its site.

Understanding different dropshipping policies is important to minimize unfulfilled orders or bad customer experiences. In essence, seamless integration is key to dropshipping, even if you use multiple channel partners. You can explore tech integrations that support the customer interface with the e-platform (or platforms) you’re using to help connect all of the dots within the process, such as shipping, tracking, delivery, etc. My company, for example, uses a proprietary artificial intelligence and machine-learning-based virtual assistant to help manage orders.

How can you choose the right partner?

Dropshipping is not for everyone. The margins can be low, which can lead some retailers to pursue a strategy of revenue growth through volume sales, but I’ve found this can lead to a race to the bottom on pricing. Also, finding the right dropshipping partners is not an easy task. As mentioned above, if things go wrong, a bad supplier could potentially damage a retailer’s reputation and hamper business growth forecasts.

Researching the market is therefore crucial. You should also look for dropshipping partners that have experience in your specific product areas and are backed up by enough team support and tech know-how. Dropshippers also often offer a series of promises and/or benefits as part of their service for which you can look, such as:

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• No minimum value or volume on individual orders;

• Guaranteed working-day delivery times within the same country;

• Regular updates on stock availability;

• Practices that ensure order information from retailers is never shared with the end customer.

These are some of the services that I recommend evaluating when looking for a dropshipping partner. You can look for all or some of the above when you start your search.


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