The path a product takes from conception to manufacturing and finally into the hands of a client is referred to as the supply chain. Hard-core supply chain experts would demand that a product’s supply chain extends all the way to the mining of the commodities (such as oil and rubber) required in its creation. But that’s a touch too much.
We don’t need to go into great detail for the purposes of this guide. All you need to know about the dropshipping supply chain are the three most important players: manufacturers, wholesalers, and retailers.
Manufacturers. The product is created by the manufacturer, and the majority of them do not sell to the general public. Instead, they offer wholesalers and retailers in bulk. The cheapest way to buy things for resale is directly from the manufacturer, but most have minimum purchase restrictions you must complete. When selling things to clients, you’ll also need to stock them and then re-ship them. For these reasons, purchasing straight from a wholesaler is frequently more convenient.
Wholesalers. Wholesalers purchase things in bulk from producers, mark them up significantly, and then resell them to retailers for public consumption. If they do have minimum purchase requirements, they are usually significantly lower than those imposed by manufacturers. Wholesalers typically carry products from dozens, if not hundreds, of manufacturers and specialize in a particular sector or dropshipping niche. The majority of them are wholesalers, which means they exclusively sell to retailers and not to the general public.
Retailers. A retailer is someone who sells things to the general public at a profit. You’re a retailer if you run a firm that uses dropshipping providers to fulfill orders.
Dropshipping is a service, not a role
You’ll see that “dropshipper” isn’t listed among the supply chain’s participants. Why? Because any of the three can operate as a drop shipper: manufacturer, wholesaler, or retailer!
Dropshipping is when a manufacturer is willing to send its products straight to your consumer on your behalf. A retail merchant can also offer dropshipping, albeit because it isn’t buying directly from the manufacturer, its pricing won’t be as low as a wholesaler’s.
Just because someone says they’re a “dropshipper” doesn’t mean they’re offering wholesale prices. It simply implies that the company will send your things for you. To get the greatest prices, make sure you’re dealing directly with a reputable wholesaler or manufacturer, which we’ll go over in detail in the following chapter.
Dropshipping in action: The order process
Let’s take a look at how a drop shipped order is processed now that you know who’s involved. To demonstrate, we’ll look at an order placed with our hypothetical store, Phone Outlet, an online retailer specializing in smartphone accessories. All of Phone Outlet’s products are dropshipped from a wholesaler we’ll name Wholesale Accessories.
The following is an example of how the full ordering procedure might look:
Step 1: The customer places an order through the phone outlet.
Mr. Rohit requires a case for his new smartphone, so he orders one from Phone Outlet’s online store. Following the approval of the order, the following occurs:
The new order will be automatically generated by the store software, and Phone Outlet and Mr. Rohitwill receive an email confirmation (likely similar).
Mr. Rohit’s payment will be automatically put into Phone Outlet’s bank account after he completes the checkout process.
Step 2: Phone Accessory Outlet contacts its supplier to place an order.
This is often as simple as having Phone Outlet forward the email order confirmation to a Wholesale Accessories sales representative.. Phone Outlet’s payment card is on file with Wholesale Accessories, and it will be charged for the wholesale price of the goods, including any shipping or processing fees.
Note: Although some advanced dropshippers can enable automatic XML (a standard format for inventory files) order uploading or the option to manually place orders online, email is the most common way to place orders with dropshipping providers because it is ubiquitous and simple to use.
Step 3: Wholesale accessories ships the order
Wholesale Accessories will package the order and ship it directly to the customer if the item is in stock and the wholesaler was able to correctly charge the Phone Outlet’s card. Despite the fact that the shipment originated with Wholesale Accessories, the Phone Outlet’s name and address will show on the return address label, as well as its logo on the invoice and packing slip. Wholesale Accessories will provide an invoice and a tracking number to Phone Outlet once the shipment has been completed.
It’s worth noting that the turnaround time on dropshipped orders is frequently faster than you might expect. Even when employing a dropshipping provider, most reputable suppliers can get an order out the door in a few hours, allowing merchants to promote same-day shipment.
Step 4: The customer is notified of the shipment via phone.
Phone Outlet will transmit the tracking information to the consumer after the tracking number is obtained, most likely using an email interface incorporated into the online store interface. The order and fulfillment process is complete once the order is dispatched, money is received, and the customer is notified. The difference between what Phone Outlet charged Mr. Rohit and what it paid Wholesale Accessories is Phone Outlet’s profit (or loss).
Dropshippers are invisible
The dropshipper is completely unseen to the end customer, despite its crucial role in the ordering and fulfillment process. Only Phone Outlet’s return address and emblem will be visible on the package when it arrives. If Mr. Rohit receives the incorrect case, he should call Phone Outlet, who will work with Wholesale Accessories behind the scenes to get the correct item sent out.
To the end customer, the wholesaler does not exist. Its main function is to stock and ship dropshipping merchandise. The merchant is responsible for everything else, including marketing, website development, and customer service.