Can you start your eCommerce portal without a single product in stock? (Drop-shipping in Indian eCommerce)
So you are bitten by the entrepreneurship bug :) And now you want to enter the hot eCommerce market in India by starting your own e-commerce portal! BUT HEY, you don’t manufacture anything.. and you don’t want to invest any money in stock either! So what will you sell? How will you do the business online?
You can still do it. And the answer to this is DROP-SHIPPING. With drop-shipping, you can sell any product without owning it. You don’t have to worry about fulfilling the orders. You don’t have to worry about blocking capital in stock. You dont have to worry about limitation in variety. The concept of Drop-shipping empowers you to start your full-fledged eCommerce website without stocking any products or investing much money.
- So what is Drop-shipping? Drop-shipping means that a seller does not keep goods in stock, but instead transfers customer orders and shipping details to manufacturer / wholesaler, who then couriers the product directly to the customer - (Wikipedia)
So if you are not a manufacturer & you want to start your online shop, you have two clear options
- Purchase & stock inventory up-front & dispatch when the order comes
- Transfer customer orders & let your vendor fulfill it (i.e. drop-shipping)
Drop-shipping is a normal part of almost every big Indian eCommerce player. Almost all of them use some drop-shipping, sometimes as a complement to their own stock. I have had a personal experience running an online shop and had tie-ups with around 30 ‘vendors’ to do drop-shipping of different products. So from personal point of view, i shall try & explain THE GOOD & THE BAD & THE UGLY side of drop-shipping in your eCommerce start-up in India
——- THE GOOD:
» It just takes away the hassle of stocking inventory. So no blocking of capital in purchasing / keeping stock and no risk of dead stock.
» There is no hassle of managing logistics either. So all you have to do is promote your e-commerce site well and attract as many customers and convert that traffic to sales. Once the sale is completed, the back-end is some one else’s responsibility.
» With drop-shipping, you can increase your product offering & variety without investing more in inventory. You can have unlimited products on your online shop by associating as many drop-shippers possible. You can have the best variety in a particular niche category
Seems like a cool idea, isn’t it? but drop-shipping has its own disadvantages too.
——- THE BAD
» Since distributors and manufacturers are different for each product category, it’s more difficult to manage. When the number of your vendors increase, there is more chance of failure in proper correspondence.
» One of the biggest issue with drop-shipping is higher shipping charges: if the customer buys 3 products from 3 different vendors then you will be paying courier charges on 3 different packages from 3 different companies. And someone, either you or your customer, will have to take that hit..
» At the end of the day, you do not have control on what is being delivered to your customer. The quality of product may not be up-to mark. The product could be defective. And then, you would get in a catch 22 situation where you might not be able to even spoil your relation with the vendor by doing returns & neither can you disappoint the customer.
» It is understandable that you might be just starting out & might not be able to generate huge sales for your vendors (at least, initially). Then, the vendors might require some minimum sales & you have to figure out if your volumes fit with their minimum requirements.
——- AND THE UGLY
When you use drop-shipping for your eCommerce venture, you need to have stringent control over every order and keep your vendor and your customer in the loop. Because, even though shipping is vendor’s responsibility, it is your brand that is attached to the transaction. So, if anything goes wrong, the consumer will blame you and not your vendor.
TO DO OR NOT TO DO..
All in all, it’s a great technique if executed well. It allows you to hand-pick & sell the widest variety of product possible in a particular category. The best eCommerce websites don’t just sell from a single vendor, rather they take advantage of the unlimited space by selling from every vendor who is worth it & can meet your standards of product and service.
WHERE DO I FIND DROP-SHIPPERS FOR MY CATEGORY?
Anyone can become your vendor & do the drop-shipping for you - A Manufacturer, A wholesaler, A distributor. Where do you find them? on other eCommerce sites!
The best resource to find vendors is ebay India. A lot of manufacturers / distributors are selling their stuff on ebay. Perhaps, they can be your vendor too! On ebay, you will find a lot of interesting stock for your store. And there are some very good vendors (based on their rating) with whom you can partner to provide variety on your store. Such vendors take care of all the stocking & shipping, and you just have to pass-on an order to them.
On other ‘jack-of-all’ e-commerce websites, most of them prominently display the vendor’s name. Try googling them & contact them. Most of them would readily agree to become your vendor too & offer their range on your eCommerce site too! You will have to really dig ebay & other ecommerce sites to find the best vendors & products for your online shop.
PS. We don’t carry a list of Indian Shoppers and there isn’t an open list of the same. But you can safely assume that anyone & everyone who is selling online can become your drop-shipper. The best way to finding your drop shippers in India has been aforementioned.
For reference you can check out Doba.com. It is one such drop shipping company and the biggest player in international markets. Although, the thing to note here is that - no such players are currently working in India. Every website in India, sets up their own network of vendors and suppliers.
TERMS TO CONSIDER WHILE NEGOTIATING WITH A DROP-SHIPPER:
- Payment terms : Initially, you might have to trust the vendor & pay him in advance before he ships the product. And this is where it becomes more important to choose the right vendors to work with.
- Margins : They majorly depend upon the category. The industry norms are 15% to 30% commission in apparels, gifts, etc & 5% to 10% margin in electronics. It also depends upon the brand. You are bound to get smaller margins on bigger brands as compared to smaller brands.
- Product Database : To list their products, it is necessary for the vendor to provide you complete database & all imp information related to the product being offered.
- Delivery time-lines : This is the most important point in ecommerce. You must try & get your vendor to agree on ‘Dispatch within 24-48 hours of receiving the order’ This is where ‘Vendor Agreements’ can be of great help. It is always advised to sign a Vendor Agreement on this & other important terms before you begin your operations.
So this was all from a personal experience & perception. Looking forward to hear other thoughts on this topic