What is Oberlo doing
How dropshipping can work seriously in Germany
For a long time I avoided writing a post about Dropshipping write here on LetsSeeWhatWorks. Because this blog stands for serious online business models and I had the feeling that dropshipping just doesn't fit in here. In the online business world, the term has seldom had such a negative connotation as Dropshipping. But why actually? And how can dropshipping in Germany be carried out successfully and seriously in the long term? Here you can find my thoughts on this and how we could help dropshipping get a better reputation again.
Why does dropshipping have such a bad reputation?
Dropshipping stands for me and many others for one cheap china import businesswhich is run by people who neither stand behind the products sold, nor know their customer group well or care about happy customers. Or in other words: Most dropshippers don't seem to care what is being sold, as long as someone buys it, the risk is close to zero and good margins can be achieved. In my opinion, this has nothing to do with sustainable entrepreneurship and is one reason why I stayed away from the topic for so long. A look at the Facebook groups shows how present dropshipping is. That alone is reason enough to write something about it on LSWW.
What is dropshipping and why did everyone suddenly want to join?
Dropshipping is a so-called drop shipping in which the seller is not the sender of the goods. In contrast to retailers who buy, store and ship their products themselves, dropshippers save on storage and the expensive advance financing of the goods. If a dropshipping product is bought online by an end customer, the seller / dealer first orders the product from a third-party dealer / manufacturer who sends it to the end customer immediately and directly. The end customer does not receive the product from the dealer (the shop), but directly from the manufacturer, who in the current dropshipping world is not infrequently a dealer in China.
For the dropshipping shop it looks attractive at first, because it does not have to buy any goods in advance, does not need storage space and has no pressure to sell because it only orders when it has generated an order and sales itself. So far so good, at least in theory. Because what prospective dropshippers do not consider at this point are questions about product liability, service, brand, accounting, customs, etc. Everything that is ultimately required for a sustainably successful online business.
How Shopify and Oberlo got the dropshipping stone rolling
Shopify - a shop system that I also use myself (here is my experience report) - has definitely set the dropshipping stone rolling with the Oberlo extension and is to blame for the fact that many people now think that dropshipping with products from China is a sensible, sustainable business model. Is not it! But Oberlo did everything right, at least on the marketing side, in order to address the "get-rich-quick" community and thus sell its own product (Shopify & Oberlo). The combination offers
- an easy-to-use user interface to source products (Oberlo) and
- an easy to use user interface to sell products (Shopify).
In other words: Oberlo makes it possible to fill a shop with apparently attractive products with just a few clicks, which have already been professionally photographed and described and sent directly by the manufacturer. You can see how easy it is in this video:
Since Oberlo is a subsidiary of Shopify, the software works exclusively with Shopify as a shop system. So if you want to do dropshipping with other shop systems, you have to look for an individual solution (which is necessary for sensible dropshipping anyway. More on this below).
Disadvantages of dropshipping via Oberlo or AliExpress
As beautiful and easy as it is to use and fill your own dropshipping shop with Oberlo, the awakening can be so bad when the first orders come in. I am particularly critical of this model
- product liability,
- the delivery times,
- the shipping quality,
- the support service,
- accounting, and
- social responsibility as an entrepreneur.
Would you also buy the products in your dropshipping shop yourself? This is the first question every dropshipper should ask. What looks quite uncritical in a coffee maker, for example, quickly becomes a problem in fashion, electronics or children's toys. Can the device even be sold in Germany? Are there any regulations that have to be complied with in order to operate products in Germany? Are there any trademark rights or protected designs that a product could violate? In any case, all of these questions must be clarified in advance before they land in the shop with two clicks. Because as soon as the first product goes online, the retailer (the dropshipping shop operator) is liable. A missing imprint or non-compliance with GDPR requirements could be the smaller problems. Because even if dropshippers do not send the products themselves, they are the dealers / sellers of the products and therefore fully liable to the customer.
Would you buy something in a German shop up to 25 days shipping time Has? Not me! Especially not if the product is also available elsewhere (possibly even on Amazon from the same Chinese dealer). If you do dropshipping, you have no choice but to accept the long shipping time. Even with premium products and express shipments, shipping times of less than 7 days from China are not possible. I honestly don't know how that can even lead to conversions. My assumption is therefore that many buyers are not aware of the long delivery time and only get enlightenment with the order confirmation or after a few days of waiting.
Screenshot from Oberlo with shipping times to Germany for a coffee accessory product
Suppose a customer actually agrees to a 25-day delivery time (or has not seen it and ordered anyway) - in this case the goods are packed, glued and sent directly by the dealer from the Far East and sent in a shipping box that is prepared for a trip around the world. I've also heard of cases in which the original invoice was even included in the package, with which the buyer could immediately calculate how high the retailer's margin is. Or what if the ignorant 0815 buyer suddenly receives mail that his package will be picked up at customs? Either way, the customer would probably not be happy and placed the last order in the shop.
Unfortunately, the classic Oberlo dropshipper cannot influence all of this. (e.g. individual shipping boxes, your own parcel tape, a greeting or flyer or simply creating a shipment together with other products)
Germany is the country of returns. It is normal for most online shoppers to send things back. This also applies to devices that were delivered via dropshipping. But what then? You can't go back to China. That would hardly be reasonable for a customer (presumably there is also a law that must enable the return of physical goods in Germany). The dropshipping seller has no choice but to give his own address for the return shipment and to receive the package there. However, if you don't have an address and are currently sitting in Bali as a digital nomad, you have to hire a service provider. One of the great advantages of dropshipping is now vanishing into thin air.
And even if the problem with the address has been solved, the next challenge is: What to do with the returned product? It could just be sold again. For this, however, a separate product with its own shipping properties would have to be created in the shop. As soon as the duplicate product (that's really stupid!) Is sold, it also has to be sent. That requires a box, tape and a post office nearby, etc. And bang, you're a normal retailer and the benefits of dropshipping are blurred.
Imagine you have the most beautiful shop in the world with the most beautiful products. What if the customer actually has to collect the product from customs or sees the Chinese characters on the packaging? The brand of the dropshipping shop will certainly not benefit from this and the customer will certainly only order once.
The own brand is the most important asset of every online retailer. The brand is the reason for a high Customer Lifetime Value. Every (well-known) sustainably successful shop is based on a valuable brand, which usually stands for quality and a good feeling with customers. For this, the products AND the trimmings have to be right. From my point of view, this is practically impossible with China dropshipping!
Formally, the dropshipping process is as follows:
- Customer buys from the dropshipping shop
- Dealer (shop) orders from dealer / manufacturer in the Far East
- Goods are sent by post from the Far East directly to end customers in Germany
Even if the service is right and the product is great, the next challenge is the accounting department. As a retailer, the end customer must be sent an invoice. This can still be solved quite easily with the right accounting software. But if you do not have a tax advisor, you have to deal with the tax conditions of buying and selling (e.g. with reverse charge, the small business regulation, etc.). If you want to be on the safe side here, you should definitely consult a tax advisor. The costs for the tax advisor must always be taken into account in the dropshipping business model.
Do you really want to send individual parcels halfway around the world for a few euros margin? Personally, I think that every entrepreneur bears a certain social and ecological responsibility in times of Friday protests against climate change. You have to decide for yourself how far everyone is willing to perceive this and, if necessary, to forego profits in favor of the overall ecological balance. I don't want to start the moral discussion here. But if, as a buyer, I can already foresee that my package will be delivered from China, I would not order. So think carefully about who your target audience is.
How dropshipping could still be a model for success
Anyone who has read this far has probably already ticked the topic off inside. But there is hope. I think dropshipping can work per se, but not with Oberlo (at least as long as AliExpress is the only product source to choose from).
Why not dropshipping within Germany (or at least in Europe) and building a close relationship with a manufacturer in order to make the entire process customer-friendly and individual?
Niche manufacturers who have created a product with a lot of passion, but are not big enough to gain a foothold online on their own, are particularly suitable for this. Why not help such a manufacturer and become an independent "online department"? Depending on success and negotiating skills, this could even be done exclusively. Why not?
Whether felt hats from Bavaria, smokers from the Ore Mountains or thatched roof solar solutions from Northern Germany ... there are certainly many niches with exciting products and very attractive margins. Just keep your eyes open. Germany has many world market leaders in their respective niches.
Why a close relationship with the manufacturer is a must
Personally, I have made the experience of how important a good relationship with the product manufacturer is (whether as a retailer or dropshipper). The only difference between retailer and dropshipper should ultimately only be the shipping location. As a retailer, you buy the goods from the manufacturer and send them from your own warehouse. As a dropshipper, you would agree with the manufacturer that he would ship. No more and no less.
If the relationship with the manufacturer is right, there is nothing to prevent the manufacturer from using, for example, the shipping boxes that you have delivered or gladly accepting returns. Here, too, the advantages for both sides are clear from my point of view:
The Dealers (Dropshipper) does not need its own warehouse infrastructure, no inventory and the necessary liquidity. The Manufacturer however, receives a new sales channel and bears no risk for it. He does not have to do online marketing, but can focus exclusively on the manufacture of the product. Win-win for everyone, if you do it right.
Incidentally, there can be many levels of cooperation even in this close constellation. From the shipping box to the shipping label to product support (after all, the manufacturer is an expert) - in the end, everything is a matter of negotiation.
Technically, of course, that has to be solved somehow. Oberlo is only a software for a specific case, namely to source products from AliExpress. You could also just use Shopify exclusively and manage the products using the Locations function.
If the manufacturer and sender cannot generate shipping labels, this could be solved, for example, using tools such as Coureon, Shippo or Sendcloud. In this case, they would be generated directly by the shop for every order and would only have to be printed by the sender / manufacturer. As soon as a manufacturer sends out small items himself, he usually already has a solution.
Find a dropshipping dealer
For the vast majority of new entrepreneurs, this seems to be a particularly big challenge. Of course, it's easier to just log into Oberlo / AliExpress and click on any product from a large catalog. I see that this is attractive.
The challenge for every online business is also the great opportunity at the same time. Either you find a product for demand, or a demand or target group for a product.
My recommendation is to just keep your eyes open, follow your own interests, use your personal relationships and ... crazy ... just use Google. Sites like wlw.de can be a good place to go to find B2B dealers.
In the end, it is important how, as a dropshipping retailer, you approach a potential manufacturer. The magic argument should more risk-free sales for the manufacturer in the long term be. Because every business-minded manufacturer has an interest in selling his products. Ideally, the manufacturer is not already strongly represented online (which makes the search more difficult), but has focused on an offline market.
As a potential dropshipper, the argument always has to be "more sales" in a market that the manufacturer himself does not (well) serve. Maybe you end up being an online retailer for a local beer or a cupcake maker that specializes in wedding catering. Maybe it's bags or earrings or hand-knitted scarves for cats. There is nothing that is not there. Sometimes you just don't see things right on page 1 on Google.
My conclusion on dropshipping in Germany
The biggest problem with dropshipping is the expectations of many (prospective) entrepreneurs. Unfortunately, Oberlo and Co. have totally screwed up the demands of entrepreneurs. Hardly anyone wants to deal with products and the entire online trade. And that's where I still see the great opportunity to do better! Better than Amazon, better than Aliexpress and the hundreds of other dropshipping shops that all do the same thing as what you plan to do.
More and more people (potential customers) want to shop more consciously and locally without having to forego the convenience of the Internet. As a small shop, with the right standards of service and the right products, you can create an overall experience that can even take customers away from Amazon. I myself went through exactly that, e.g. with my Business Happy Coffee, and can therefore say that it works (even if I don't do dropshipping). The only downer is: it takes time and requires some brainpower.
What do you think?
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