What is dropshipping?

You've heard a lot about dropshipping , but you're still quite confused about how this type of retail sales works, given that in Italy it's often talked about superficially and sometimes not in a very positive tone.

We at SPS Fulfillment are here today to enlighten you on this topic and explain what dropshipping is and give you some general ideas on how you could start a dropshipping ecommerce business. We are sure that you will be very fascinated by the opportunities that are open to you and maybe you will decide to try your hand at the world of online sales!

Index

• Definition of dropshipping
• Advantages and Disadvantages of Dropshipping
• Is this really a zero-cost activity?
• How to find the best suppliers and products

Definition of dropshipping

Dropshipping is a type of sales that allows you to sell products online without actually owning them and without having a warehouse . When a customer makes a purchase on your online store, it will then be the supplier you decide to rely on who will take care of packaging and shipping.

To give you a practical example, if a customer goes to your online store and buys a wallet from the brand "whatever" for 30 euros, then your supplier will immediately be notified that there has been an order for that wallet and will proceed to process that order.

At this point, you will have to pay the price of the wallet to the supplier which could be, for example, 25 euros. In this way you will earn 5 euros on that single sale.

You might now ask yourself: what does the supplier gain from this ? Well, the supplier will probably be able to find the "whatever" wallets in stock at even lower prices than those at which he sells them to you, furthermore, he gains from the fact that no one has to think about advertising his products, since he supplies them, in fact, to other sellers who think about selling the product. It's a chain that works, don't you think?

What you have just read is obviously just the tip of the iceberg and so far it all seems too good and convenient to be true… Right?

Advantages and Disadvantages of Dropshipping

There are of course several advantages and disadvantages to a dropshipping business. Let's start by talking about the advantages first.

• Low Initial Costs Starting a dropshipping business requires a fairly low investment capital, especially when compared to the money needed to open a physical store in Italy! In dropshipping, there are no warehouse rental costs, inventory setup costs and often not even employee costs.
• No unsold goods In dropshipping it is impossible to have unsold goods, since orders are processed by the supplier only after the end customer has made the purchase.
• Remote Work You can run a dropshipping business remotely, from anywhere on the planet, as long as you have an internet connection.
• Variety of Products Dropshipping allows you to test the market and see which products sell best. If you notice that a product "doesn't work", no problem! You can always find another one to sell in your online store at no additional cost, and you can also leave the "doesn't work" one just in case.

As the saying goes, "all that glitters is not gold", in fact dropshipping also has some disadvantages that we now want to bring to your attention.

• High competition As you may have already guessed, the supplier you decide to rely on will most likely be the supplier of other online stores. This means that your product will hardly be a unique and exclusive product. You will have to find the right strategy to attract customers and beat the competition.
• Low profit margin As we explained before, the profit that comes from dropshipping sales is based entirely on the profit margin and therefore on the sales price increased by a certain percentage compared to the supplier's sales price. This often leads all online stores to engage in a "race to the bottom" and sell the same product at the lowest possible price to beat the competition. Even in this case, you will therefore have to study the right commercial strategies to get customers on your side. Do you want some advice? For example, you could make yourself known as a serious company with excellent customer care and create a well-maintained and easy-to-navigate website. This could justify a slightly higher price than the competition.
• Unreliable Suppliers Choosing the right supplier is crucial in a dropshipping business. Your entire profit depends on the reliability of the supplier you choose. If some suppliers are late in shipping packages, give the wrong address, send the wrong product, or even forget to ship altogether, well, all of this will reflect very negatively on your reputation.
• Customer Service It is certainly true that the supplier thinks of everything, but not of everything. In fact, if there is any problem in the shipment or any question from the buyer, you will have to manage all the relationships with the customers.

Is this really a zero-cost activity?

From what we have presented to you so far, it seems that starting a dropshipping business costs zero euros. In reality, however, this is not exactly the case, although, as we have already told you, you will not have any costs for goods, shipping or storage.

First of all, the first expense you will have to face is the one related to the website of your online store . Sure, maybe you have already heard that it is possible to do dropshipping on eBay or Amazon by opening an online store at extremely low costs, however, dropshipping on these platforms brings some disadvantages, such as commissions on each individual product , other taxes and a competition that is nothing short of ruthless.

Our advice is therefore to open your own e-commerce site and take care of it as best as possible. There are some online platforms that allow you to do this without knowing complex programming languages ​​and one of the most famous is certainly Shopify . The management costs of an e-commerce website, however, are around 200-300 euros, depending on the platform you decide to use. In addition to these costs, you will then also have to add the cost of the website domain, but this is generally 20-30 euros per year.

In addition to the costs of the site (and now comes the pain) there are the costs of managing the VAT number . Yes, to do dropshipping in Italy you must have a VAT number. We are not accountants, but the recommended ATECO code is 47.91.10 "Retail trade of products via the Internet", furthermore registration with the INPS traders management is required, you will have to activate a PEC address and then you will have to register with the CCIAA (Chamber of Commerce). We strongly recommend that you consult your trusted accountant to delve deeper into all these topics.

Last but not least you will have to spend, at least in the initial stages, on marketing to make yourself known and thus promote your products and your site. You could for example make use of advertising campaigns using Facebook Ads or Google Ads. In addition to this, we can advise you to make a website with good SEO, so that search engines put you as high as possible in searches performed by customers.

In short, you have understood that it may take some money to start and manage a dropshipping business and in reality it is not as simple and free as many promise.

How to find the best suppliers and products

In light of what you have learned so far, you have surely understood that the fundamental things to do to be successful in a dropshipping business are choosing a reliable supplier and choosing a product that is attractive to the market.

If you have no idea where to start, we at SPS Fulfillment can help you. Our mission is to help those who want to start an e-commerce business, even in dropshipping. We will take care of finding the right supplier and product for you, and we will also manage the entire customer service part. We already have some products in our warehouse and you can consult them on this page of our website.

Ultimately, starting an ecommerce business can sometimes be frustrating and difficult. By relying on a competent company, you will take away all the stress deriving from the most boring practices of an ecommerce, furthermore, you will also significantly reduce the risks of running into some unreliable or even fraudulent supplier.

For any additional information, do not hesitate to contact us through the appropriate form that you find on this page of our website.