Dropshipping or e-commerce with your own stock, listen to these experts
Lars Hurkmans, graduated econometrician from Maastricht University, is co-owner and head of research development at Marktmentor. Markmentor is an all-in-one e-commerce platform focused on Bol.com with the largest database in the Netherlands and Belgium. Today, he represents ecommerce companies with their own inventory in the Netherlands. His opponent, Lou Bartels, a business administration graduate from Roosendaal and founder of U-Send. Through his company he helps sellers with a webshop as an agency against competitive price guarantees. Today he represents dropshippers in the Netherlands.
Own stock sales channels
Lars has a ready answer to the question "what is more profitable?" "For seasonal products and evergreens you have to keep your own stock of course, but it depends on what you want to offer". The trade-off, he says, is to focus on evergreen products with fast delivery times. According to him it is a question of risk versus return. Through Bol.com you can earn fine, even on hype products, but recognizing products in the inflection phase (the moment a product becomes popular as a hype) is essential. Lou Bartels immediately responds that in that case it is more lucrative not to have your own stock - "once a product is no longer trending, you simply change the product on your webshop and look for a better one."
After registering with the KVK, you can start your product research, either with product research software, or old-fashioned by hand via, for example, the shopping cart method. "The more diversity in your portfolio, the better. In the ideal scenario you have about 20 products that are evergreen, supplemented with seasonal products, so that you generate sales throughout the year." advises Lars. Through Alibaba, for example, you can buy your products. These will then be transported to your garage or fulfillment party.
After the purchase you can put your products online on Bol.com and Amazon "...or on EBay, Google Shop, Shopify or WooCommerce and even Facebook Marketplace" adds Lou. "You can hitch a ride on that big brand name by offering stock on these marketplaces, but by also investing wisely in marketing via Bol, you can maneuver even faster to the first page. That's where the sales ultimately take place," says Lars.
Due to the large-scale increase in demand for online, the middleman with a physical store has, as it were, been pushed out of this value chain. Now a product comes from the wholesaler or the fulfillment directly to the consumer via a package delivery company. The number of suppliers and also fulfillment centers are mushrooming. Indeed, the growth and profitability of e-commerce does not go unnoticed.
Dropshipping sales channels
The business model and value chain are slightly different for a dropshipper. Often a product is shipped directly from suppliers to consumers. This is a step faster for the turnover rate of the products, but it does not mean that a product gets to the consumer faster. In most cases, an order placed on a dropship website is forwarded to a supplier. This secondary transaction only takes place once the product has been purchased in the primary transaction. Therefore, for dropshippers, the risk is lower than with their own inventory. Lou explains that you do need your own website to do this, "Unless you are particularly talented and can code as well as sell, then you probably won't want to build your website yourself. That's where handy companies like Ecwid, WooCommerce and Shopify have cleverly capitalized on it."
Benefits of dropshipping (by a dropshipper)
Lou notices that more and more young entrepreneurs are finding dropshipping to be a great replacement for minimum wage on the patio or in the supermarket. "Certainly we are seeing an increase in demand for our services. The scalability of dropshipping because you are not tied to cash flow issues because of large inventories, and also partly because of the Covid pandemic in which many students and young people with zero hours contracts were fired without mercy, are both arguments to start. "
The number of hours a dropship entrepreneur spends on their web store can be a very attractive reason to start dropshipping. Sometimes it only takes a few hours a day to create new ads (or even take over from a competitor) and to accept orders. This leaves you with more time for an extra side job, study or just a lot of free time. Bali, for example, has been full of successful e-commerce dropshippers for years, because one final benefit of dropshipping is the freedom to travel and work from a laptop anywhere in the world.
Advantages of stock holding e-commerce (by an ecommerce professional)
On the other side, then, is stock-based e-commerce. There are plenty of stories of e-commercers who are tight adults and, by offering a few good products on Amazon, achieve particularly high sales. One of them of a boy, 16, who made $1.7 million in sales was mentioned in the Wall Street Journal.
Managing your own inventory does make your commitment to the business more laborious. For example, you pack packages yourself and take them to the nearest delivery point. The advantage of this is control over every step in the process. Every action you take contributes directly to your profit, which is yours. So it's not like in a restaurant or supermarket where every ten minutes you see someone paying for €200 while you yourself earn just €100 that day.
"In many cases outsourcing inventory management is a good choice once you sell more than 200 products per month and if the volume and weight lends itself to it..." indicates Lars "...yet you should actually keep the stock in-house as long as possible, especially because of the importance of being able to deliver quickly, also during holidays and other force majeure situations." Bol.com is happy with quick deliveries from sales partners, because consumers like to be served quickly. Therefore, this often provides more opportunity on the buying block. Moreover, competing on own competence is more interesting than competing on price.
There are also particularly good fulfillment centers that can take the packing and shipping process off your hands with ease and for relatively competitive prices - even during the holidays. A big market leader and partner of e-pickr® in this is Active Ants. But Bol.com and Amazon are also happy to help with the success of your e-commerce adventure. Through programs such as Delivering Via Bol (LVB) and Fulfilment By Amazon (FBA) your products will arrive on time at the consumer and moreover packaged in a branded box or bag.
Finally, the market researcher says: "If you only buy one product per order, you will not always get the best price from the supplier. This is at the expense of your profit margin, but negotiating for a few products at a time is difficult. In contrast, on Alibaba.com you can compare suppliers based on price, minimum order quantity and additional options such as adding your own brand to the product or packaging. You also get a volume advantage if you purchase multiple products, a bit like economies of scale. Bundle freight is also cheaper than shipping items by the piece and that all adds to your bottom line!"
E-commercer responds: disadvantages of dropshipping
In addition to the positives of both business strategies, we also asked both parties about each other's markets. For example, Lars stated "dropship stores can have long delivery times because items are shipped from far away. Despite the high demand for sea containers and limited air traffic in recent years, this delivery time has become much shorter. Products used to be on the road for months, but today that is also only 6 to 10 days." Lou responds familiarly "We do hear that argument more often, but then the price is adjusted accordingly. Dropship products are often hype, so the demand determines the price. Hence, dropshipping is not about economies of scale, but economies of scope."
Social media like Instagram and TikTok are also part of this battlefield. The disadvantage for dropshipping is that it is blocked by social media advertising and payment providers. This is where U-Send can help. Through its strong delivery promises is the chance of not arriving products more than 50% smaller. It's fun to see the well-designed videos and images pass by on a daily basis, but it's mainly a jackpot for the owners of these media channels who earn from it. "It's a trade, but with society's increasing consumption, there's a strong opportunity to still make a good profit given you don't have to worry about being stuck with unsold stock as a dropshipper." replies Lou.
Dropship responds: disadvantages of stock-based e-commerce
"So here's the biggest disadvantage to stock-based e-commerce...," says the dropship expert: "...for a dropshipping business, you literally only need a laptop. Because your products don't have to be paid for until the customer places an order with you, you could almost call it selling on consignment." Although you actually remain the owner of the product and thus bear the responsibility of both quality and delivery, you do indeed have a much smaller financial risk. In addition, you can control how much you spend on SEA, such as Facebook ads, Tiktok & Pinterest ads, and that makes this expense an easily controlled variable.
However, it is easier to advertise on other channels or bring in sales via social media. "As a seller on Bol.com or Amazon you do have the benefit of their brand name, but then you are still among thousands of other sellers as well as Bol or Amazon itself. Now, if you can build your own brand on the socials and optimize your sales funnel at the same time, then it becomes a serious business" argues Lou. On a side note, of course you don't have to make your brand and sales funnel too complicated. Simplicity is good for business. But it is interesting to see how every Euro or hour that you spend on your business, results in sales and profits.
Conclusion: what suits you better?
An e-commerce store stands or falls with researching your market. A hype product works better in the dropship world, but an evergreen does very well with its own inventory management. It's almost like deciding between stocks and bonds, but in this case you have control over what happens to the stock market. So once you have found a good selling product, either with good betting, or with a strong data tool such as e-pickr® for Amazon or Marktmentor for Bol.com, you will see that you are in the clear.
So are you in for a real competitive field that likes to make things as difficult as possible for each other while searching for the best trending products? And if you don't want to incur too much upfront cost, dropshipping is a good consideration. On the other hand, if you prefer to have more control over both your supply chain, as well as product quality and quality of delivery, then stock holding e-commerce is a better option.
Ultimately, both businesses are easy to set up with a budget as small as 300 Euros. Both have already demonstrated that. So whether you choose lower risk in investment with more risk in the supply chain, or higher risk on your investment with lower risk in your supply chain, you will need a good entrepreneurial mindset. As any entrepreneur can attest: not everything works out the first time. As long as you keep working and believing in your own ability (or with a little help from e-pickr®, U-Send and Markmentor).
Thanks for your time, Lars Hurkmans and Lou Bartels.