Dropshipping in South Africa - Good idea or bad?

"Drop shipping". It's the latest buzz phrase being bandied about by 20 something internet millionaires. It's actually a practice that has been around since the dawn of commerce but only recently has it gained popularity with the advent of technology that makes it easy to manage.

But what is drop shipping exactly, and how can you take advantage of it in South Africa? 

What is dropshipping?

True drop shipping is effectively the practice where you market your suppliers products, and sell them onto your customers, but where your supplier ships those products directly to your customers without you ever seeing the end product. Your customer pays you the retail price, you pay the supplier the wholesale price and everybody wins. You make some money, your suppliers makes his portion and your customer gets their product.
Here's an image to explain a little bit more: 

Dropshipping

Many people like the drop shipping model, because there are very few costs to setup, and there are no costs to warehouse the products and get them delivered. All you're doing as the 'retailer' is marketing the products to your customers and your supplier takes control of the rest. 

This is great! Why isn't every business drop shipping? 

In order to setup a sustainable business you need to think of every aspect of your businesses processes, from product choice to pricing, to fulfillment to after sales service. Drop shipping is often not the best model to tick all the boxes.

Take a look at this table to understand if drop shipping will work for you. 

  Aspect Qualifying questions
1. Product choice

What are you going to sell?

Would you buy this product yourself?

What problem does this product solve for your customers?

Why would somebody buy this product from you?

Can you sell this product?

Can you brand this product?

2. Pricing

What will your supplier charge you for this product?

What will your supplier charge you to ship this product? 

What will returns cost you for this product? 

Are there any other costs involved in selling this product? Guarantees, warranties etc? 

What will it cost me to market this product?

What are other businesses charging for similar products?

What can you charge customers for this product? 

3. Fulfillment

How will your supplier ship your product to your customer? 

How will you handle returns? 

How will your product be packaged?

Where is your product being shipped from? 

4. After sale

What do you do if a customer doesn't receive an item? 

What do you do if a customer receives the wrong item?

How will you handle refunds? 

How will you manage your guarantees claims?

Can you afford to ship replacements? 

What does it cost you to provide service to your customers? 

 

The more you think about the different aspects of your business, and the more you question those aspects, the more likely your business is to make a profit and to succeed. Research has shown that the number one indicator of a business succeeding is product choice. If nothing else focus on your product choice first. 

If after evaluating your product drop shipping doesn't make sense, consider buying some of the products outright and shipping them to your location. You'll only pay one shipping charge, and you'll more often get a lower wholesale price because you are buying outright.