The e-commerce boom, expected but expedited by lockdowns has meant rapid transformation in the retail industry as well as disruptive changes in consumer experience and behaviour.
What was once an expensive selling platform reserved for titans in the industry like department stores and multinational brands became easily accessible, affordable with extremely low barriers of entry for new entrants.
Suppliers, resellers, brands, brick and mortars entered a new era coupled with multi billion infrastructure investment in the courier and international shipping industry.
In effect affordability, extreme competition from service providers (domain companies, marketplaces, shipping services etc.) led to a low capex threshold for new entrants into the market.
It took decades for consumers to begin purchasing clothing, groceries, electronics online mostly from well established brands with proven quality in service and product authenticity. What happens next and how the industry will be shaped depends wholly on you, the reader, the consumer, the determinant of the future of online retail.
While in the short term, such low barriers of entry meant hyper competition between small sellers leading to lower consumer prices authenticity, quality and remorse have also been increasing which have damaged consumer trust and led to an environment where it is difficult to establish whether a brand is an authentic seller/retailer or merely a drop shipper in the game for a quick buck.
In this article, we explore several different types of sellers and discuss what separates those suppliers that can be relied on for the long term as opposed to those here for the ride which are in effect reducing consumer trust and positive experience in online shopping.
The majority of sellers you see on such marketplaces as Amazon, etsy (recently), and shopify are what we call dropshippers.
The business model is an interesting one. Seller A invests in creation of a website on a platform such as Shopify by purchasing a plan and a domain name investing as little as 100 dollars with minimal time spent on website creation.
Seller A then uses a website such as Alibaba or Aliexpress to effectively copy listings from Chinese manufacturers of generic products to populate their storefront.
You, the buyer then spends their hard earned money in purchasing a generic product on these websites and effectively paying the manufacturer directly and receiving the good from China with average delivery dates of between 20-45 days.
The appeal to consumers is a no brainer. This option is by far the cheapest method of purchase as you are effectively paying a small amount to a middleman who stores and invests in no inventory (in Canada) and foregoing service quality and quality assurance for a low price.
What is the true cost of dropshipping for the industry? To compare, we need to introduce a second type of retailer to see how dropshipping is negatively affecting the industry overall.
Retailers, wholesalers and stockists are the backbone of the Canadian economy. This is a proven business model which benefits the consumer and the economy as a whole because of the value added in the local economy.
Remember, when you opt for the cheaper dropshipping option your Canadian counterpart is simply a middleman.
When you purchase from registered businesses that invest in inventory and stock physical product, value is added from port until the time the item is delivered to you.
In this business model, Seller B is a bonafide registered company in Canada with a valid permit and business number which actively invests in purchasing larger quantity of products (hence lower prices) to resell.
Suppliers to stockists can be Global, most prominantly from the UK, EU, US & China. Seller B uses capital to purchase goods from a supplier (overseas or domestic), has the goods delivered to Canada, pays duties on the products, has the items shipped to its warehouse, sells the product to you and delivers it locally or internationally.
Throughout this business model, jobs are being supported along the way and value is being added in the domestic market.
Perhaps more importantly, the bonafide company takes risk and title to the products purchased and is directly responsible for defects/issues and reputationally has more to use for selling poor quality goods or offering low service quality.
Shipping is usually faster (as it is domestic), and more often than not while domestic shipping may be more expensive, product prices are actually much lower.
There are many intangible and tangible reasons why you should be weary of continuing to purchase from dropshippers:
It's becoming more and more difficult to tell whether you are buying from a bonafide company or a dropshipper, however some listing sections should be a red flag. If you see any of the following, more than likely that you are buying from a dropshipper and effectively losing any control over fast and reliable service and quality assurance:
We hope this article helps to make your choice in this increasingly difficult online arena a bit easier.
As a consumer spending hard earned money on products that should last you for a considerable amount of time, minimum 30 day returns, and fast same business day shipping are the most simple things you should expect from a retailer.
Together we can support local industries and ensure together we build an industry benefiting local jobs and lower long term prices and higher quality in the market.
Chideno Team
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