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A Study on the 3 Main Variables New Dropshippers Must Focus On

Dropshipping is well known as a low-cost alternative for entrepreneurs interested in e-commerce, but newcomers in this community are not aware of the main factors they have to take into account when starting their businesses. The 3 main variables these entrepreneurs have to take into consideration are choosing the right product/products, defining a how to get the goods to clients, and how to increase sales with technological tools. Many scholars agree that when choosing a product its characteristics determine whether it will successfully sell in the online markets. A starting entrepreneur in this business must be aware of the different channels the goods can and should be sold through. Research shows how the 3 variables specified in the article play an important role in any starting business in the dropshipping community, and if taken into account by newcomers could lead to a successful business venture. In the dropshipping community there are hundreds of variables an entrepreneur is told to focus on but the 3 variable model offered in this article solves this problem and sets those who follow it apart from the 9 out of every 10 e-commerce businesses that fail before reaching 120 days of operation.

Choosing a Product

When planning to dropship, choosing which product to focus on is one of the most important steps in an e-commerce business’ life. Choosing the right product to dropship can be a complex task since there are millions of options to choose from and each with a varying degree of success in the current market. One method for tackling this is by analyzing which product characteristics are compatible with online selling of the product rather than selling in physical locations. In Sodero et al’s article, marketing and administration faculty as well as researchers recognize two main aspects related to the subject: Firstly, how a product’s characteristics like color, size, style, substitutes, and cost can affect its success in the online market. The second aspect they dive into is the product’s characteristics not only dictating whether the product will sell or not, but also determine through which channel it will do better (Sodero et al, 562). Sodero et al realized an empirical analysis and learned that characteristics that vary from “neutral” (colors, shapes, etc.), and the availability of many different style variations, cause the buyer to feel a need to realize a physical inspection before buying anything (Sodero et al, 563). When diving into shape as an active issue: “Similarly, nonstandard-sized products might also require more effort from consumers to assess fit, consequently facing higher ϕ [unit cost for retailer]” (Sodero et al, 566). To prove these trends they used the online fashion industry as an example since its products often have varied array of costs, colors, and styles.

Choosing a Channel

Another very important aspect of starting a dropshipping business is setting up a system for the goods to get to the consumers. In this case, e-commerce and supply chain management professor Arkadiusz Kawa (Poznan University, Poland) focuses on the different options a newcomer will have when choosing between the different fulfillment models available. Fulfillment refers to the processes that go from the moment customers make a purchase online to when the goods are delivered. Arkadiusz cites Ateneh Ayanso, who is a researcher in finance and operations systems, when summarizing the main idea of the article: “In e-commerce, there are two approaches adopted by e-retailers in the field of dropshipping: pure dropshipping and partial dropshipping” (Ayanso et al, 135-152). In other words, he addresses the pros and cons of a partial (not straight from manufacturer to consumer) or a pure (straight from manufacturer to consumer) dropshipping model. He also talks about fulfillment services as an industry and makes predictions regarding its future development. Other parties involved in this topic push retailers towards a specific direction they think is correct for smaller, newer businesses.

Usage of Technological Tools'

Another important obstacle newcomers face and experts suggest is fundamental to determine at the early stages of a dropshipping business is the countermeasures that are going to be used for customer retention. In dropshipping, when talking about countermeasures, it it a reference for the technological tools that will help a business interact more with ant individual customer. In Akturk et al’s article, “Managing consumer returns with technology-enabled countermeasures", researchers in both industrial engineering and operations management discuss the four main technologies causing frequent dilemmas:

1.                    Customer return need not be complicated by complex automations if the seller can charge high restocking fees (charge to take product back).

2.                    A business should only collect information on clients if privacy concerns will not or do not represent big costs for the business.

3.         Sellers must only use product tracking technology if the costs of getting the product to the client do not rise by more than a certain amount.

4.           The fact that return fraud must not be ignored since it does affect a retailer’s profit as well as the business’ direction (Akturk et al, 1-26).

References

M. Serkan Akturk, et al. “Managing consumer returns with technology-enabled countermeasures”, Omega, Volume 102, July 2021, 102337, ISSN 0305-0483, https://doi.org/10.1016/j.omega.2020.102337. (https://www.sciencedirect.com/science/article/pii/S0305048320306915)

Annibal C. Sodero, et al. “The strategic drivers of drop-shipping and retail store sales for seasonal products”, Journal of Retailing, Volume 97, Issue 4, Dec.2021, Pages 561-581, ISSN 0022-4359, https://doi.org/10.1016/j.jretai.2021.09.001. (https://www.sciencedirect.com/science/article/pii/S0022435921000609

Kawa, Arkadiusz. "Fulfillment Service in e-Commerce Logistics." LogForum 13.4 ProQuest, Vol. 13, Iss. 4, 2017, pp. 429-438. https://www.proquest.com/docview/1953150341?parentSessionId=ei8iO41OftURCm5nW%2B%2Fzkk%2BSzEnCNP3pXUbmcVcnDcQ%3D&pq-origsite=summon&accountid=36796

Hanser S. Jimenez G, et al. “A dynamic inventory rationing policy for business-to-consumer e-tail stores in a supply disruption context”, Computers & Industrial Engineering, Volume 142,  106379, ISSN 0360-8352, 2020, https://doi.org/10.1016/j.cie.2020.106379. (https://www.sciencedirect.com/science/article/pii/S0360835220301133)

Kawa, Arkadiusz. "Fulfilment as Logistics Support for E-Tailers: An Empirical Studies." Sustainability, vol. 13, no. 11, 2021, https://www.proquest.com/docview/2539991440?parentSessionId=YrVl8Q%2FFz6FdYlWHJionwGflgCDCBff0m0g5WShD0MU%3D&pq-origsite=summon&accountid=36796

Nguyen, Terry. “Drop shipping, explained.” Vox, 8 Nov. 2021, https://www.vox.com/the-goods/22763901/drop-shipping-explained

StackCommerce. “Dropshipping through Amazon may be a profitable side hustle for entrepreneurs in 2022.” Financial Post, 22 Jan. 2022, https://financialpost.com/personal-finance/business-essentials/dropshipping-through-amazon-may-be-a-profitable-side-hustle-for-entrepreneurs-in-2022

Sattar, Kamil. “Seven Steps to Start a Dropshipping Business in 2022.” Forbes, 11 Feb. 2022, https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/11/seven-steps-to-start-a-dropshipping-business-in-2022/?sh=1d87e624bf18

“How to Start Dropshipping: A Definitive Guide.” Wiio, 18 Jan. 2022.

https://www.wiio.io/how-to-start-dropshipping-a-definitive-guide/

“What is a Fulfillment Center and Why is it Important?”, BigCommerce, 18 April 2022,

https://www.bigcommerce.com/ecommerce-answers/what-fulfillment-center-and-why-it-important/

Sattar, Kamil. “Seven Steps To Start A Dropshipping Business In 2022.” Forbes, 11 Feb, 2022,

https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/11/seven-steps-to-start-a-dropshipping-business-in-2022/?sh=7e0423604bf1