With dropshipping, creating an e-commerce store may seem extremely simple and above all inexpensive at first sight. No investment, no inventory, no management of shipments and customer returns, no unsold items… this may seem quite heavenly for those who are not too fond of product logistics. But a good start in dropshipping presupposes giving yourself the means to achieve your ambitions on the sales side… The precise definition of dropshipping and keys to success.

What is dropshipping?

To put it simply, the definition of dropshipping could be summed up as an organization of the logistics of shipping products as part of online sales. That is to say a tripartite organization between the customer, the reseller, and the supplier.

The seller, the owner of an online store, sells products via his site (until then, logical). But it is the supplier, manufacturer of these products, who will take care of the shipping of orders and any returns in the event of customer dissatisfaction.

The seller never has the products in hand, which for him are only virtual references on his e-commerce site.

For the customer, the operation is transparent. Indeed, in dropshipping, the supplier sending the products does not operate in his name. The customer therefore never realizes, a priori, that it is not the shop from which he ordered that sent him his order.

Dropshipping businesses are therefore virtual shops, whose juxtaposition of products is only the effect of agreements with supplier platforms.

Definition of dropshipping: what are the advantages for the seller?

Dropshipping is a smart way to report both:

  • stock management,
  • delivery flows and customer returns,

on the supplier and no longer the seller.

For the latter, the operation is financially very advantageous because he does not bear the associated costs, he does not invest in a stock and therefore cannot have unsold items. He enjoys :

  • great flexibility in the management of its catalog (simplified deletion and addition of references),
  • a concentration of its efforts on the sales part only (no shipping work),
  • the viral power of web acquisition channels to sell (natural referencing, social networks, and associated advertising techniques),
  • automated e-commerce platforms that simplify order management.

If the advantages of dropshipping are numerous, it also requires a well-oiled organization and real work concerning the notoriety of the e-commerce site, which can be relatively expensive. Because in this area, the competition is fierce.

Definition of dropshipping, what are the conditions for success?

Without deploying a complete business strategy here, let’s just remember that to work, dropshipping e-commerce must respect a certain number of operating rules, all of which are quite logical.

A relationship of trust and quality with suppliers and therefore the negotiation of suitable contracts.

The customer must indeed be able to count on fast and efficient delivery, as well as in terms of possible returns. However, in this matter, only a few days late and it is customer dissatisfaction, unfortunately always much more viral than its opposite…

The success of a drop shipper’s store is therefore partly based on the good working relationship maintained with suppliers.

Continuous and significant efforts to work on the notoriety and ergonomics of the e-commerce site, assuming an appropriate budget.

The environment is extremely competitive on certain themes (sale of shoes, clothing, decorative objects… existing sites are almost in a monopoly position.

To breakthrough, the drop shipper must, therefore:

  • work on your positioning and specialize to attract niche traffic easily, which must be the subject of dedicated work in your market research.
  • take care of the notoriety of its site (advertising, social networks, various relays),
  • continuously refine the user experience and the design of the site to make it as efficient and pleasant as possible (easy and reassuring use of the shopping cart, easy access to product sheets, etc.),
  • offer a customer advisory service, particularly in the choice and appreciation of products. As in any commercial relationship, this point can make the difference with other sites: online help via a chat, advice and comparative articles, dedicated white papers, news to comment on new products and provide information, etc.

Effective product catalog management

It is up to the dropshipper to make the effort to regularly consult his suppliers to avoid offering products whose stocks are exhausted.

Establishment of an efficient accounting organization to focus on the sales part.

This seems logical, a profitable activity in e-commerce presupposes a certain number of sales, as many movements which proportionally increase the work of accounting follow-up. When it comes to dropshipping, managing recoverable VAT can also become time-consuming. To save time, the drop shipper has every interest in opting for an accounting solution adapted to e-commerce.

The advice of our accountants for the accounting of your dropshipping business

To conclude this article on quick presentation and definition of dropshipping, let’s take a quick look at the useful options that must be considered when launching e-commerce in dropshipping. In terms of VAT in particular and when choosing the legal status, it can be good to ask yourself the right questions before starting the machine (or before the oxen, in short… we get lost):

VAT:

In this regard, you must follow your turnover amounts by country of purchase to be able to adapt the VAT recovery method according to the international thresholds in force and which vary according to the country… on this point, see how VAT applies in dropshipping.

The solution: choose a sales tracking tool that manages purchase destinations and can provide you with totals by country.

Legal framework :

When you start dropshipping, should you choose a particular legal status? In fact, yes and no.

Given the postponement of inventory management, you have relatively little initial investment compared to traditional trade. This gives you the freedom to start with the status that suits you personally (among others, the micro-enterprise scheme for example).

But if you have to invest a lot in advertising, development costs, etc. You will have to mobilize a starting capital finally quite substantial. In this case, if you choose to associate, you will not be able to choose any legal status. Ditto, if you want to reassure banking partners.

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