The entire path through which a product passes from the conception of its ideas through production and to the customers is termed “supply chain.” For full-time suppliers, they advocate supply chain begins from material mining, where the materials used in production are obtained. However, that takes supply chain too far.
Throughout our context in this guide, we will not be talking that intense. All you need to focus your mind on when you hear supply chain in dropshipping are the retailers, wholesalers, and manufacturers.
So, who are the manufacturers?
These are the people who create products that finally get to the consumers. However, most manufacturers don’t sell to the public or consumers directly. They sell to wholesalers and retailers.
For anyone who wishes to resell, it’s best to buy from the manufacturers. But most of the manufacturers have set minimum standards and requirements anyone must meet before buying directly from them. Likewise, there is the need to stock and deliver the products when selling to your customers, who in most cases, are the consumers. Looking at these reasons, it’s better to buy from a wholesaler.
Whether in dropshipping business or not, wholesalers still play similar, if not the same role. They purchase products in bulk, directly from manufacturers and sell to retailers with their profit margin added. These retailers, in turn, sell to the public. For wholesalers who have purchasing minimums, they set standards lower than those set by manufacturers.
Wholesalers often stock products in dozens, or even hundreds of what manufacturers stock, and tend to specialize in particular niches. Some wholesalers are strictly into wholesaling; this means they don’t sell to the general public but sell only to retailers.
Anyone who markets and sells to the public is a retailer. Retailers sell at a markup and are common among online entrepreneurs who are into dropshipping business. If you are in a business where dropshipping suppliers fulfill your orders, then you are a retailer.
Dropshipping is Not a Role. It’s a Service
Did you notice that “dropshipper” was not mentioned above? That’s right, and the reason is not far-fetched. Any of the three (manufacturers, wholesalers, or retailers), can take up the work of a dropshipper.
When you buy from a manufacturer who is ready to ship your products to your customers on your behalf, such manufacturer is acting as a dropshipper. Likewise, a retailer can decide to dropship, though at a higher price somewhat compared to wholesalers.
Someone posing as a dropshipper doesn’t guarantee cheaper pricing. This simply entails that they will deliver orders on your behalf. However, to get the most competitive pricing, you need to work with a manufacturer or a legitimate wholesaler. We will look into that consequently.
The Order Process of Dropshipping
Now that you are abreast of the key players in dropshipping business, it’s time to understand how a dropshipping order gets processed and shipped. For detailed illustration, we will be considering a virtual phone outlet store, Global Phones, that deals on phone accessories. In the same vein, let’s assume Global Phones dropships from Allware Accessories, a wholesaler.
Here’s just how a typical ordering process goes down;
Step 1 – Global Phones gets an order from a random buyer
Mr. Smart, a random buyer, needed a new battery for his phone, and saw what he was looking for on Global Phones’ stores, and placed an order. After order approval, some things happen, and they are:
- Global Phones and Mr. Smart get email confirmations of the order placed. This email notification is generated by the store software automatically.
- Mr. Smart’s payment is picked and deposited into Global Phones’ bank account.
Step 2 – Global Phones Sends the Order to their Supplier, Allware Accessories
This is a simple process where Global Phones forwards the email received earlier to Allwares Accessories’ sales representative. The wholesaler bills Global Phones the wholesale price of the ordered item(s), as well as the shipping costs using their credit card.
It’s worthy to note that some dropshippers support automatic XML order uploading. This is a format for inventory files. Likewise, some allow manual order uploading online.
Step 3 – Allware Accessories Ships the Order
Everything being equal, the wholesaler will package the order and ship to the customer with the supply address as Global Phones’. Once the wholesaler has finalized the shipping, they will forward an invoice with a tracking number to Global Phones (the retailer and store owner).
Obviously, dropshipped orders have faster turnaround times than you may think. Some dedicated dropshipping suppliers can ship within hours of receiving an order, and this gives retailers room to advertise same-day shipping service on their stores.
Step 4 – Global Phones Reaches Out To the Customer Regarding Shipment
Once the retailer gets the tracking number from the dropshipper (wholesaler), they send it to the customer via email. With this completed, the order has been fulfilled, and the retailer’s profit is the difference between what the customer paid, and what the paid the wholesaler.
Dropshippers are Invisible to Customers
Despite the inevitable function of dropshippers in order fulfillment, they are totally invisible to the consumers. When the buyers get their package, they see the logo and return address of the store they placed their order. Assuming the buyer receives the wrong package, they contact the retailer who gets back to their wholesaler to get things right and ship the right item.
To the end consumer, there is nothing like a dropshipping wholesaler, all they know is the retail store where they ordered.
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