Playing middleman is one of the fastest ways to venture into the business world.
It’s relatively easy — buying a product and selling it off with a bit of markup. And with today’s technology, it got even easier — sell a product, and the supplier ships it directly to the buyer WITHOUT even going through your hands.
How easy can it get, right?
Reality check: You’re not among the first who’ve thought of
earning a quick buck through dropshipping.
With social media and ecommerce platforms in the picture, the middleman has also evolved and is now known as a dropshipper.
What is dropshipping?
Dropshipping is a business model wherein a middleman facilitates the purchase and delivery of goods between the buyer and the supplier. It’s a simple retail order fulfillment method and the seller is not required to keep the products in stock. They just market the product, take the order and then passes it on to a third-party supplier, who will ship the order to the buyer.
It looks good on paper — the store can operate without capital as there’s no production or inventory cost, and you don’t need to source courier services to deliver the orders.
How to start a dropshipping business?
There are three simple steps to start your own dropshipping business:
- Sign up to an online selling platform – this can be a Facebook or Instagram account, ecommerce platforms like Lazada and Shopee. Basically an online space where you will sell the products.
- Look for supliers – Source out suppliers that dropship to the Philippines based on the products you want to sell. Research for items trending online or products that will appeal to many buyers. Profitable dropshipping products fall under these categories:
- Fashion and beauty
- Health and wellness
- Electronics and gadgets
- Entertainment and lifestyle
- Cooking and kitchenware
- Market your products – Start posting your products on your social media and ecommerce platform along with good photos, the pricing and delivery details. Advertise on Facebook if you have a bit of budget. Also come up with promotional discounts and offers to attract more customers.
When the orders start coming, your dropshipping partner will take over and finish the job for you.
The risks and disadvantages
How dropshipping works is very attractive. For one, it removes the logistical nightmare of the usual ecommerce business from the equation.
When it used to be that the middleman buys the goods from the supplier and sells it to the buyer, dropshipping places the middleman as merely someone who facilitates the payment. The products go directly from the supplier to the buyer.
And this is where the problem starts in the dropshipping business model. You may realize that there are more risks over benefits to running a dropshipping enterprise.
1. It is cutthroat
You are not among the first hundred people who have thought of earning a quick buck through dropshipping.
I mean, come on!
It can be a dog-eat-dog world wherein prices can change with a phone call or when supplies suddenly dry up. Or when the pandemic hits and complicates the logistics network.
A marketing strategy can get ripped off within five minutes of posting since every other competitor is selling pretty much the same, often unbranded, things as you are.
There’re instances wherein competitors pose as buyers and place a bulk order only to cancel it in the end.
2. Extremely slim margins
While dropshipping gurus have harped on the windfall profits that one can gain from this business model, the truth of the matter is: everyone is working around extremely slim profit margins.
The industry is volatile as each dropshipper would scramble to drop prices just to close a sale.
3. You have no control
As a dropshipper, your main goal is to get your target customers to place orders through you. What happens between the placement and the receipt of the order is something that is totally beyond your control.
It’s the dropshipping supplier that does the quality control on the products, selects a logistics partner for delivery, and every other step along the chain. Whether the supplier ships it out on time, or not, is something that you can only pray for.
As a dropshipper, the products will never go through your hands — you don’t even get to see the actual product before it goes to your buyer. Delays may happen or the item delivered is not to the buyer’s satisfaction. Your customers will flood you with complaints but there’s nothing you can do.
Your online selling reputation can flush down the toilet in an instant. You can look for another supplier, but customer trust will be difficult to rebuild.
4. You’re the sole guarantor
The dropshipping business model is like a ménage à trois involving the buyer, the dropshipper and the supplier.
As the dropshipper, you will act as a guarantor to the other two, promising quality and delivery of the products to the buyer, and promising payment to the supplier.
In most cases, the dropshipper advances payment to the supplier while the buyer deposits in escrow — meaning the money is held in trust until the transaction is completed. Just one of the parties opting out of the transaction puts you in a precarious situation.
Since the dropshipper merely facilitates the order process and payment, there arere other factors that aren’t taken into consideration.
For one, delayed shipping of goods, low quality of goods, or plain dissatisfaction of the buyer.
What happens is payment has been made to the supplier but the buyer opts out, putting the dropshipper at a loss with no goods nor money in hand.
Also, good luck getting a refund from the supplier, even in cases when it’s clearly their fault. Reminds you of that toxic relationship, eh?
5. There is no transparency
One of the pitfalls of the dropshipping model is its lack of transparency and accountability on the part of the supplier.
The end goal of a dropshipper is to get the buyer to place and pay for bulk orders. They are just as clueless as the buyer as to the quality of the products or if it was made within reasonable ethical standards.
Finding good suppliers for dropshipping in the Philippines
Despite all its shortcomings, being a middleman is still an essential part of the economy. But if you want to play the role of being one, make sure that safeguards are put in place to protect you and your investment.
Start with finding a reliable dropshipping supplier. Check their customer reviews and, if you can, sample their products for yourself.
After all, a true businessman will not sell a product without vouching for it. So at least make sure that the product that you’re selling is truly what it says it is.
Business is more than just closing a deal and earning a profit; it’s being able to deliver the product that was actually being sold.
Everyone is on the lookout to earn that quick buck. But is it sustainable when you can’t even vouch for the quality of products that you put out there? Is it really worth the risk of getting dropped in the end by unsatisfied customers?
In online selling, as in any endeavor, it pays to have a reliable partner that you can lean on through thick and thin. One that you know won’t drop you like a hot potato when the going gets tough.
If you still think dropshipping is for you, be informed, find a good supplier — check for history and reviews — and prepare a good strategy to succeed in your business.
Featured image by KTStock on Getty Images
