I am a frequent reader on Facebook of current business and entrepreneur pages. Something interesting I came across today on Inc. Magazine’s page was an article on Weebly’s CEO and how he is saying no to one of the hottest trends in E-commerce. Hence, I knew I had an interesting topic to blog about and explore further.
Here is a quick description along with a helpful graphic from Oberlo of what dropshipping is for all readers who would like to be refreshed or have never heard of it before.
Dropshipping, basically, is where a platform online doesn’t keep any product in their inventory that it is selling. You are buying the item on their site and the company places the order to the supplier who has the product directly shipped to you from the supplier, never being handled by the site you actually bought the product from. This is an appealing business model as the company does not have to see or handle it, making for a much more efficient and profitable model. With this model, it is much easier for businesses to get started and off the ground running as they save capital, have more flexibility in locations they can operate out of, have lower overhead, can offer more products to the market, and can scale easier.
So, with all these advantages and a model that seems to be pretty successful at a glance along with one of the hottest trends currently, why is David Rusenko (Weebly’s CEO) taking a stand against the method? After all, Weebly serves an ever growing number of e-commerce merchants.
Rusenko’s feeling towards dropshipping is “what it comes down to is that we think there is enough mass-produced, cheap crap in the world.” The article goes onto state that dropshippers are basically e-commerce middlemen. Their value comes from revealing customers to products that they would never have been exposed to otherwise. Basically Rusenko, sees the whole process as one that is very frustrating. When a consumer buys a product from a platform like eBay or Shopify from a dropshipper, they have the product marked up from the actual product you are buying that is listed on a site like Amazon. A result of that is that it creates unneeded stress and confusion for the customer who then does not know what to do if they want to return the product. The customer then wants to return the product to Amazon, for example, as the product came in Amazon shipping packaging. So, in the case of dropshipping – the original seller gets bit with the cost of returning the product.
Also, dropshipping is being done more and more through sourcing the products they are selling from cheap Chinese platforms. This directly resulting in the quality being barely existent, a growing number of scammers exploiting the process, the ads aren’t upfront and accurate about the true nature of the product, and the shipping time from China being quite lengthy.
Something I would like to add to the dropshipping debate is that as entrepreneurs, our main ethos is to provide value to society through the product or service that we provide. What value are we really providing to customers and society by marking up an already existing product from another platform and listing it on a different one at a higher cost? You can damage your own reputation, the industry as a whole, and most importantly the original creator’s brand by conducting business like this.
With the reasons stated above and the focus on the problems when it comes to low profit margins, inventory issues, ethical issues, shipping complexities, and supplier worries – it can be a bad business decision. David Rusenko of Weebly certainly sees it as one and that is hurting real creative entrepreneurs. I would love to hear your opinion on the matter and further the conversation below!
If you want to read the full article – the link is provided here: https://www.inc.com/sonya-mann/weebly-dropshipping-burner-brands.html