What does dropship order mean?
When you order for a commodity or goods from a seller, he/she can either sell the product from his/her store or can accept the order and pass down the order to a third party supplier. This is known as the dropship order, as the seller or the store receives the order and then drops or shipped to a third-party store. The dropship order method is quite different from the conventional way of the supply distribution process. The traditional method of order distribution goes through the distribution chain starting with the manufacturer, the distributor or wholesaler, then to a retailer and finally, the product reaches the consumer at the end. While it is the retailers that usually engage with the dropship orders, at times, the manufacturers and distributors, up higher on the supply distribution list, could also be certified for dropshipping a product.
Why drop ship the orders when you can go by the usual, traditional process?
When a seller accepts dropshipping orders, he/she is not required to hold a stocked up physical inventory of goods. Usually, when the seller has run out of goods, he has to let go of the order due to the product unavailability that is ordered by the consumer. This affects his business as he risks letting go of his trusted customers and consumers as well. Dropship orders not only help the sellers at the lower end of the supply chain but also support the manufacturers and distributors.
When a retailer accepts a drop-ship order, he can transfer these orders to the manufacturer or the distributor who has a stocked up physical inventory of such products or supplies. And the manufacturer or distributor ships the charge to the end consumer directly. Both of them gain a monetary amount at the end. This process of dropshipping cuts through the traditional distribution process for the benefit of consumers. According to articles, 23 percent of total online sales were completed via dropshipping, which amounted to around $85.1 billion in 2017.
As a retailer or an e-commerce business, if you are investing in a dropshipping market, it is highly recommended that you align your business with a software vendor that offers you accounting software like Deskera. With the Deskera Books feature, you can easily create the dropship orders for your supplier. And all that is required of you is to update the fulfilment status once the actual shipment is made and the accounting software takes care of everything else.
But there are a lot of challenges that the retailers, wholesalers or distributors have to go through when drop shipping the orders to the consumer.
The sole motive of holding a stocked up physical inventory as the supplier is to align the earnings from an order directly to your end. But if you engage in the dropship business, you end up taking a fraction or portion of the earnings that the primary supplier will receive. It would not be wrong to say that you would receive the skimmed up part of the profit.
In the supply business, the more money that you invest, the more chances are of your profitability. But if your investment is less, like that of dropshipping, your returns also decrease.
- More Hard Work, less investment= profit in the dropshipping business
- Less Hard Work, less investment= Loss in the dropshipping business
The dropshipping business works on a lower margin of profit. It is for this reason that a dropshipping supplier has to engage a lot in his company to keep up with the financial stability of incomes and profits for his business. Conventionally, a retailer’s bulk purchase is about 13 per cent of what a supplier usually would prefer to sell.
- High competition in the market-
Because the dropshipping market demands lesser investment than the traditional and conventional supply business, there is a very high competition in the market for the same.
Dropshipping is usually done in the e-commerce market, where sellers and wholesalers have the option to interact and expand their business mutually. But if you are trying to build your business on an e-commerce platform through dropshipping, it gets more difficult for you to create a faithful customer base due to this existing competition in the market.
Most of the sellers offer discounted prices, what new does your business have to offer?
It is more difficult for a new seller to approach the dropshipping business than it is to a well-established brand that has acquired regular and promising traffic from customers.
The biggest obstacle posed before the e-commerce retailers is locating the reliable and good supplier in the initial stages, almost 84 per cent of the e-commerce retailers have cited the same obstacle. The level of competition in the market that a retailer needs to overcome when starting his business is, therefore, challenging.
There are times when unanticipated issues arise in the supply distribution chain. Say you are the retailer who just took the order and passed down the order to another wholesaler or distributor, or even another fellow retailer who has a stocked inventory. You have no control over the rest of the supply chain in a dropshipping business. It entirely depends on the retailers and wholesalers that you passed down the order to deliver. These are the times when the legitimacy of suppliers lead to the legal issues that may arise for you too. The merchandise that they ship could be illegally acquired or could be a stolen property of another company or brand that the parent brand is not aware of, and this can potentially have unwanted legal consequences.
- Unrestrained supply network-
The supply distribution chain of the dropshipping market is quite unclear and ambiguous. The initial seller who passes down the order does not have any control over the rest of the distribution chain. This results in the inability of the seller to address the concerns of the consumer in the e-commerce business. He/she has to entirely depend on the supplier to deliver the product in the time promised.
Thus, it is clear that the ambiguous pathways that a dropshipping order might take, reflect on the customer service that the entire system of distribution.
Every business has to deal with the obstacles that come in the way of achieving their set goal. While the dropshipping market might have its own set of challenges for the retailers and distributors that engage in the same, the benefits that it offers overshadows. Reports suggest that the manufacturers that participate in the dropshipping market have a higher profitability rate of about 18.33 per cent than those who depend on traditional and conventional distribution channels.
Impressive, isn't it?
How to track your dropship orders using accounting software?
The accounting software allows you to track and manage your dropship orders very conveniently. You can track your order with the automated tracking numbers that the software has explicitly generated for the charge into consideration.
All you need to do is enter the dashboard and log into your account. After logging in, go to the tab or feature that allows you to track the dropship order. And the accounting software displays the details of your shipment on the screen.
It is that simple!
With the accounting software, you can easily create and generate invoices from the array of diverse professional-looking templates and track as well as record the orders and bills at one place.
Choosing the best invoice and accounting software for small business is very important, as reliable software will offer you with a lot of features that will make the management of dropship orders easier and very convenient. has been
At Deskera, you get to create the invoices, track the expenses incurred and also get a real-time view of the finances of your business, all according to your comfort and requirements.