What is Dropshipping Supply Chain & Why Should You Care So Much

Last article we talked about lessons dropshippers can learn from B2B2C model:

1. Optimize Supply Chain 2. Adopt a Customer-Centric Approach 3. Utilize Technology and Data 4. Effective Marketing and Branding

In this column, let’s focus on No.1 lesson and help you to make theory lessons a reality step by step.

What is Dropshipping Supply Chain

Generally,

As dropshippers we sell products without holding any inventory themselves. Instead, when a customer places an order, the retailer forwards the order details to a third-party supplier, who then ships the product directly to the customer.

So,

Based on this, we can extend the following detail points:

1. Researching: Researching is crucial for product selection. Here’s a complete selection guide: link here
2. Marketing: Do search engine optimization (SEO), pay-per-click advertising (PPC), social media marketing, other content marketing and Customer Engagement, Sales Promotions, remember to do analytics and optimization of all above.
3. Purchasing: Supplier Selection, Placing Orders, Payment Processing, and Order Fulfillment.
4. Logistics: Depends on the supplier’s efficiency and logistics capabilities. So Supplier Selection is crucial.
5. After-sales: Coordinate with suppliers to ensure that returns and refunds are processed smoothly and customers are kept informed, mostly depends on suppliers.

Why Must You Care So Much About the Dropshipping Supply Chain?

Many dropshippers might think that dropshipping is all about front-end operations, focusing entirely on traffic generation, marketing, advertising, acquiring new customers, and customer retention, doing everything possible to increase order volume. While these are indeed important, what determines long-term competitiveness is a stable supply chain.

Among all the negative reviews left by consumers, an average of 74.2% (data comes from Trust Pilot) are due to supply chain issues: delivery delay, bad product quality, customer's note was ignored, etc.

Some dropshippers believe that once their order increases to a good level, they will be able to bargain and can easily negotiate prices with factories. However, many dropshippers fail just when their order volume starts to improve.

The reason is simple: when order volume suddenly increases, fulfillment quality often can't keep up. This leads to shipping delays or inconsistent product quality, resulting in more customer complaints. Consequently, the new customers and orders you worked so hard to acquire will disappear, and all your efforts will be in vain.

Therefore, in dropshipping, it is crucial to ensure that your supply chain is stable.

When you don’t have a stable supply chain, the following problems might find you.

1. Lack of supply chain concepts, resulting in only mechanized selection and testing of products.

2. Receiving an order only to find that the previously selected supplier is suddenly out of stock.

3. Paying suppliers upfront for goods but not receiving payment from customers upon contract completion.

4. Long logistics times leading to order cancellations by consumers.

5. Consumer customization requests not being met seriously, causing complaints.

Due to limited space, specific "how-to" solutions of these problems will be provided in later articles.