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E-commerce Operations: Dropshipping & Fulfillment

39 cards · 🇺🇸 English

How dropshipping works and how order fulfillment happens behind the scenes.

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Dropshipping

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1Dropshipping
A retail business form where the seller accepts customer orders without keeping stock, instead transferring orders to manufacturers, wholesalers, or fulfillment houses who ship directly to customers
2Main advantages of dropshipping
Avoids costs of maintaining warehouses or storefronts, purchasing and storing inventory, and employing necessary staff; requires minimal initial investment and can be managed from any location with internet
3Main drawbacks of dropshipping
Lower profit margins, less control over product quality, limited control over shipping/storage/inventory management, and increased risk of shipping delays or supply chain issues
4How did Amazon use dropshipping in its early success?
Offered over a million books while keeping only ~2,000 popular titles in stock; publishers/wholesalers shipped directly to customers using Amazon packaging
5Order fulfillment
The complete process of receiving, processing, and delivering customer orders, including inventory management, picking, packing, and shipping
6Fulfillment house
A third-party company that handles storage, packaging, and shipping of products for retailers, allowing them to outsource order fulfillment operations
7Blind shipping
Shipping merchandise without a return address corresponding to the seller, concealing the actual source of the product from the customer
8Private label shipping
Having merchandise shipped from the wholesaler with a customized return address matching the retailer's brand, making it appear to come directly from the seller
9Can dropshipping retailers be required to disclose their practice?
No, dropshipping retailers are not required to disclose the practice nor their wholesale sources, just like any other retailer
10How do eBay sellers use dropshipping?
Sellers list items as new and have purchased items shipped directly from wholesaler to customer; profit is the difference between customer price and wholesale price minus fees
11What dropshipping method is prohibited on eBay?
Fulfilling an order by purchasing the item from another online marketplace (e.g., Amazon) and having it shipped to the customer; sellers using this method can be suspended
12Common inventory risk in dropshipping
Products may be listed as available but actually be back-ordered with the wholesaler or manufacturer, causing delays that are beyond seller's control
13What factors affect dropshipping economics?
Cost of goods, handling and shipping fees, marketing and advertising expenses, profit margins, and scale/efficiency
14How do dropshippers make profit?
Through the markup from wholesale price; the difference between what customer pays and what dropshipper pays the supplier, minus selling/merchant/shipping fees
15How can shipping fees impact dropshipping profits?
Suppliers may charge flat rates or percentages of sales price; since dropshippers don't physically handle products, fees vary by supplier and customer location, impacting margins
16What e-commerce platforms facilitate Chinese dropshipping?
Alibaba and AliExpress provide marketplaces for suppliers and dropshippers to connect, facilitating growth of the dropshipping model
17How has the Chinese government supported dropshipping?
Established policies, initiatives, and regulations to promote e-commerce; created special economic zones and tax incentives to encourage e-commerce and export industries
18Brick and mortar store
A physical retail store with a building, as opposed to an online-only or virtual retailer
19Virtual retailer
A retailer that only has a website with no physical storefront
20Packing slip
A document included in a shipment detailing contents and often including retailer's company name, logo, and contact information
21Microtargeting in dropshipping
A marketing strategy where dropshippers target very specific customer segments with tailored advertising, often on social media platforms
22Common dropshipping work-at-home scam
Scammers sell lists of 'businesses' for dropshipping that are actually middlemen (not wholesalers) charging prices leaving little profit margin and requiring regular service fees
23Risk of dropshipping from unreliable suppliers
Customers may receive products different from advertised or not receive products at all; can damage seller's reputation despite seller having no control over fulfillment
24Common problem when customers discover dropshipping
Customers realizing they overpaid may return the item to seller and reorder directly from manufacturer, causing return processing costs and loss of unsold returned product
25Markup in business
The difference between the cost price (wholesale) and the selling price, representing the seller's gross profit margin
26Cost-effectiveness in dropshipping
The balance between costs (goods, shipping, marketing) and benefits (sales revenue, profit margins) to determine economic viability
27SEO (search engine optimization) in dropshipping
Marketing strategy to improve online store visibility in search engine results, helping attract customers without paid advertising
28Influencer marketing in dropshipping
Partnering with social media influencers to promote products to their followers, a common marketing strategy for dropshipping businesses
29Flat rate in shipping
A fixed shipping cost regardless of distance, weight, or other factors; some suppliers charge flat rates while others use variable pricing
30Inventory management
The process of ordering, storing, tracking, and controlling inventory; in dropshipping, this is handled by suppliers rather than the seller