Dropshipping vs. classical e-commerce
In today’s world, online commerce is becoming more and more popular and the number of online stores is constantly increasing. One way to be successful in e-commerce is the dropshipping model.
But how does dropshipping actually work exactly? What are the advantages and disadvantages of the model and which providers are there in Germany? In this article, we will answer all these questions and give tips for a successful dropshipping business.
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Dropshipping in detail
Dropshipping is an e-commerce strategy in which the retailer does not stock physical goods, but works directly with a supplier to deliver products directly to the customer.
The supplier is responsible for storing, packing and shipping the goods, while the merchant is responsible for selling and fulfilling the orders.
In essence, the merchant acts as an intermediary between the customer and the supplier, making a profit through the price difference between the purchase and sale price.
The steps for dropshipping are as follows:
The customer places an order in your online store.
The order will be automatically forwarded to your supplier.
The supplier packs and ships the product directly to the customer.
One of the biggest advantages of dropshipping is that it is relatively inexpensive and easy to start, since the retailer does not have to buy or store inventory. Some successful examples of companies using dropshipping include AliExpress, Oberlo and Wayfair.
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- Low cost and easy to start
- Retailer can focus on sales and marketing
- Low risk and high flexibility
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- Less control over shipping process and product quality
- Difficulty identifying reliable suppliers
- Tighter margins due to supplier participation in selling price
Classic e-commerce in detail
Classical e-commerce refers to the online sale of physical goods by a company that stocks an inventory of products and is responsible for shipping them.
The retailer is responsible for purchasing, storing, packaging, and shipping the products to the customer. The process for traditional e-commerce is similar to retail, except that the transactions take place online
The retailer is typically responsible for all aspects of the business, including marketing, sales, customer service, logistics and inventory management.
The steps for classic e-commerce are as follows:
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- A customer makes a purchase from your online store
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- The order is transmitted to your fulfillment center.
- The product is packed and shipped at the fulfillment center.
- The courier you choose delivers the package to your customer.
Classical e-commerce has the advantage that the retailer has full control over the shipping process and product quality. Some successful examples of companies in classic e-commerce are Amazon, Zalando and Otto.
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- Full control over shipping process and product quality
- Greater flexibility in product selection and pricing
- Ability to diversify business by selling different product categories
- Requires higher investment in inventory and logistics
- Higher risk of inventory overhangs or unsaleable products
- Increased responsibility and workload for the retailer in terms of marketing, sales, customer service, logistics, and inventory management.
Brand-Building in E-Commerce
Brand-building refers to creating a strong and memorable brand that customers will remember.
In e-commerce, brand-building is especially important as online competition increases and it becomes more difficult to stand out from other online stores.
The elements of a strong brand in e-commerce are:
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- Catchy name and logo
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- Clear positioning and values
- Consistent visual identity
- Excellent customer service and quality of products
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- Scalability of business processes
- Effective marketing strategy
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The aim here is to present customers with as realistic an image of the products as possible and thus inspire them to make a purchase. A well-designed online store can strengthen customers’ trust in the brand and increase the conversion rate.
Another important strategy for successful brand building is an effective social media marketing strategy and the use of influencer marketing campaigns.
With a professional presence on various social media platforms, a brand can reach a wide audience and increase brand awareness.
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- Define a clear positioning, values, and visual identity for your brand
- Invest in high-quality product images and design an engaging online store
- Provide outstanding customer service and ensure product quality
- Scale and streamline business processes, to ensure effective execution
- Develop an effective marketing strategy that includes social media marketing and influencer campaigns
- Continually track the results of the strategy to increase customer satisfaction and strengthen customer loyalty
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Which model is better for you?
When it comes to making the right choice between dropshipping and traditional e-commerce for your online business, several factors should be considered:
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| Dropshipping | Classical e-commerce | |
| Cost and investment | Low investment costs, as no inventory needs to be purchased or stored | Higher initial investment, as inventory must be purchased and stored. |
| Running costs | No running costs for storage and management of goods. | Running costs for storage, management and logistics of goods. |
| Logistics and delivery | Low control, higher risk in terms of product quality and shipping time | Full control, higher investment in warehousing, shipping and logistics |
| Scalability and growth potential | Easy to scale, as no investment in inventory is required | Limited scalability due to warehousing and logistics |
| Brand Building | Challenging, as it is more difficult to build a strong brand when you have no control over product quality | More control over product quality and therefore better opportunities to build a strong brand |
- Analyze your financial situation and understand how much capital you have available to build your online store. If you have a limited budget, dropshipping might be a better option because you don’t have to buy or store inventory.
- Think about how much time and energy you want to invest in your business. Dropshipping requires less time and effort for logistics and inventory management, but more effort for marketing and customer service.
- Consider your goals for the growth and scalability of your online store. If you want to develop a strong brand image in the long run and build your own logistics and shipping infrastructure, traditional e-commerce might be a better option.
Conclusion
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Both dropshipping and traditional e-commerce can be profitable in online retail. It is important to choose the approach that best fits your situation.
- Dropshipping requires no investment in inventory and storage, while classic e-commerce requires the purchase and storage of inventory.
- With dropshipping, the supplier is responsible for storing, packaging, and shipping the products, while with classic e-commerce, the retailer is.
- In classic e-commerce, the retailer has full control over the shipping process and product quality, while in dropshipping the supplier is responsible for this.
- The profit margin in dropshipping is usually narrower because the supplier participates in the selling price, while in classic e-commerce the retailer receives the full selling price.
- Dropshipping requires less time and effort for logistics and inventory management, but more effort for marketing and customer service.
In summary, dropshipping and traditional e-commerce have their own advantages and disadvantages.
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However, the key to success in e-commerce lies in developing a strong strategy and the ability to adapt to the challenges of the market.
Frequently asked questions (FAQs)
How to find reliable dropshipping suppliers?
To find reliable dropshipping suppliers, it is recommended to do online research, read reviews and contact the suppliers. You can find a list of the top 300 dropshipping suppliers in Europe here.
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How to find the best dropshipping providers?
To find the best dropshipping providers, it is important to do careful research and compare different providers. There are many online directories and market overviews that list a large number of dropshipping providers. In addition, testimonials and reviews from other merchants can be helpful in assessing the quality of the providers.
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Can I be successful in the long run with a dropshipping business?
Yes, it is entirely possible to be successful in the long run with a dropshipping business. However, as with any other business model, it depends on several factors. It’s important to develop a clear strategy to scale the business and stand out from the competition
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What are the advantages of classic e-commerce over dropshipping?
The advantages of classic e-commerce over dropshipping are that the retailer has full control over the shipping process and product quality, has greater flexibility in product selection and pricing, and has the ability to build its own logistics and shipping infrastructure.