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Dropshipping 101

Dropshipping is not a new concept, but it is one known for being very tough to master. More entrepreneurs are looking at this business model for their companies because it eliminates a lot of pricey running costs.

There are both pros and cons to dropshipping, and it is, by no means, a method of making a quick buck. As a merchant, you will need to look at the advantages and disadvantages in depth, compare them to your business, your margins and the products you are selling, as well as your distribution method before you know if dropshipping can work for you.

Dropshipping - an in-depth analysis

There are some very big advantages to dropshipping:

Firstly, upfront costs. As an online retailer, you have a virtual store and dropshipping allows you to have a virtual inventory too. This way, you do not have to lay out large amounts of capital to buy products in bulk or meet minimum purchase requirements. Plus, you will not have any warehousing costs to cover either.

Secondly, bulky items. Certain product types lend themselves better to the dropshipping model, especially big or bulky items. These items are expensive to receive, store and ship, so it is simply practical to dropship them straight from the manufacturer to the customer.

Next, location. The location of certain suppliers can also provide a geographic shipping cost advantage for you - they may be nearer to your target audience or located in a main centre, thus decreasing most shipping rates. Finally, apps and other platforms are being developed to streamline this process. Using software like Shopify and uAfrica makes it really painless to get your orders to the dropshipping supplier. Through technological advances, dropshipping is becoming an easier process to start and run.

However, there are some major problems with dropshipping that merchants often forget to take into consideration:

For one, it’s costly. Usually an inventory-based retailer pays less per unit than a dropshipping retailer for the exact same product, and, as a result, this can mean that your retail prices need to be higher in order to cover your own costs.

You will also, very likely, face product limitations. Sometimes suppliers will not offer their full range of products for dropshipping. For example, the product might be a fast mover and the supplier knows that they can move the product without dropshippers.

Another massive issue with dropshipping is higher fulfilment costs. When you dropship, you not only pay the real cost of stocking, picking, packing and shipping the product to your customer - you also pay a hefty markup which means dropshipping costs scale as your sales grow. When you stock products yourself, you have a lot more control over these costs and can work on ways to decrease and manage these costs.

Customer service issues are also an issue in dropshipping. Dropshipping requires at least twice as much customer service, and problems with orders are more difficult to sort out as you have no control over the fulfilment process. The internal systems of some manufacturers and wholesalers are also quite cumbersome to work with and this will increase order processing time.

Finally, there is a definite lack of local dropshipping suppliers. Dropshipping suppliers in South Africa are difficult to find. However, we at uAfrica work with an amazing company called Dropstore. Dropstore is a dropshipping marketplace that makes it easy for you to find awesome products from South African suppliers to sell on your online store. If you are looking for products to sell on your online store, they are the guys to talk to.

Dropshipping is a relatively new idea in South Africa, but one that is growing steadily. Our top tip if dropshipping is something you want to do: find local suppliers. Local suppliers can generally ship faster and more affordably than international ones and they are generally easier to work with in terms of pricing, stock, etc. There will also be fewer surprises when it comes to taxes, logistics, payment and business etiquette with a local supplier.

Dropshipping using uAfrica

We at uAfrica work closely with many successful dropshippers in South Africa and we get daily queries on how uAfrica can be used in conjunction with the dropshipping model. Even if you are not using uAfrica, keep these points in mind when looking at your logistics and fulfillment processes.

Multiple suppliers with multiple addresses

Dropshippers often have multiple suppliers stationed in various locations, which makes shipping a pain. However, if you are on the gold plan with uAfrica, you can add unlimited sender addresses (the address from which your product will be shipped from). When you then fulfill orders, you simply specify from which sender address the parcel must be picked up from. This is a very important feature to have when dropshipping, regardless of what fulfillment software you are using.

Warehousing and storage

There are two ecommerce models that you can adopt for your business:

One: If the customer’s order contains products from three different businesses, these orders can be shipped separately and directly to your customer. This means that there will be three shipments and the customer will receive three separate parcels.

Two: If the customer’s order contains products from three different businesses, but you would like to consolidate these products so that your customer only receives one parcel, you will need to do three shipments from your three different suppliers to you (or a third-party company), and then a fourth shipment from you to your customer. This means that there will be four shipments in total, but the customer will only receive one parcel.

Many dropshippers prefer that their customers only receive one consolidated parcel with all the products from the various suppliers, as opposed to their customer receiving many parcels from the many suppliers separately. Unfortunately for the dropshipper, this will mean that you will need to either operate out of your home or have access to some kind of storage solution to help with warehousing and dispatch.

uAfrica does not have any warehouses for dropshippers to use, but we can refer you to our friends in the industry who can help you with this. Dropshippers will then ship products from their supplier to the warehousing solution, they will repackage the orders and ship the parcel straight to the customer from there.

Shipping into South Africa

uAfrica does not ship internationally and only operates and ships within the South African borders. Many dropshippers get their products from overseas, but unfortunately, another courier company will need to assist you in getting products into South Africa. Once your products are in South Africa, uAfrica can step in and help you in getting your products to your customers.

To dropship or not? That’s the big question

Dropshipping is not an easy model to follow, especially in the South Africa market. We have heard of and seen so many successful dropshippers in other countries, but we work in a very unique nation with a very unique commercial landscape. Although there are some dropshippers who have gotten it right in South Africa, it is still tough to master.

There is a common misconception that dropshipping is a cost-saving business model, but the reality is that the money you save on storage and warehousing often gets spent on increased shipping costs. That is why it is so important to look at everything in-depth before deciding on adopting the dropshipping model for your business. Once you have decided to start dropshipping, the next step is to have the right partners and the right processes in place in order to ensure a smooth-running, streamlined operation.

Useful resources:
uAfrica.com
uAfrica takes the messiness out of running a successful online store. With quotes from various couriers, automated shipping labels and a multichannel feature that updates inventory and centralises order management. Logistics has never been easier!
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