In a conventional e-commerce business, the store buys in stock of some products they think will sell. The store pays warehousing costs for those products, and puts them on their online store for customers to buy.
When the customer clicks the “buy” button and the transaction is complete, the store then boxes up and labels the items and sends them to the customer.
That’s a straightforward 1-to-1 business model that is essentially nothing more complicated than a corner store, expanded geographically to the whole world by computers and online purchasing power.
That’s not how blind dropshipping works. But it’s how blind dropshipping wants to look like it works.
What happens in blind dropshipping is that stores put up items for sale on their electronic storefront.
They do not as yet own the items, and the store does not have to pay up front either for the purchase of the products they claim to sell, or to warehouse those products until they are sold.
When the customer buys the item via the store’s website, the store pays the supplier direct for the item, and the supplier sends the item from its warehouse direct to the customer.
That’s a standard 1-to-1-to-1 business model, with the store as the middleman between the supplier and the customer.
Everybody benefits – the supplier gets access to customers they would not otherwise have, because the store makes its products available on its website.
The store takes the mark-up between the supplier’s price and the price it charges to customers, for simply providing the shop window. And the customer gets the products they want.
Great. So far, so good, so dropshipping.
Where does the blindness come in?
You could argue that’s a little sleight of hand. Heck, you could argue it’s downright dishonest. But let’s not, or we’re not about to have fun in our adventures in blind dropshipping.
The blind element is all about consumer trust.
Customers buy from the store, either because the store can get them the items they want, or because they trust the supply chain.
The actual supply chain in blind dropshipping, as we’ve seen, is a three-way relationship. But you want to be able to leverage the perception of a trusted supplier that the customer has of the store.
Sending them their items from some unknown supplier, possibly in a whole other country to the one they think they’re dealing with, could cause customer confidence to waver, even though the quality of the product and the quality of delivery is exactly the same as it would be if it came direct from a warehouse belonging to the store.
So, to ‘blind’ the customer to the three-way relationship, in blind dropshipping, the supplier has standard shipping boxes and labels, rather than anything branded to themselves as suppliers.
When the order comes through from the store, it’s the supplier that boxes and labels up the product/s in the order and sends them to the customer as though they were coming direct from the store.
So while the relationship is really three-way, in blind dropshipping, the idea is to maintain consumer confidence in a straightforward two-way transaction.
One of the interesting facts on drop shipping is that it derives from the Just-In-Time (JIT) system of inventory management introduced by Toyota in the 1950s, which aimed to eliminate wasteful and non-productive manufacturing practices.
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Pros Of Blind Dropshipping
Using standard boxes and unbranded labels helps maintain a trust between the store and the customer. While there’s no actual difference in the process whether it’s a two-way or three-way relationship, customers frequently feel more trust towards stores if they believe they are in a 1-to-1 relationship with them.
That means that blind dropshipping maintains that relationship of trust, despite taking advantage of the economies of the dropshipping model.
Dropshipping generally allows stores and store owners to start up and operate with much lower overheads, as they are not paying either for a large amount of stock ahead of sales income, nor for the warehousing and depreciation of that stock while waiting for customers to buy the items.
It also saves store owners having to manage their own distribution process. Simply trusting to the supplier’s distribution operation takes all the hassle out of the fulfilment process.
Blind dropshipping still allows for this convenience, while seeming to the customer that the purchase and distribution of items is a simple two-way transaction.
Blind dropshipping stops the growth of any direct relationship between the supplier and the customer, so they can’t cut out the middle-man store owner and deal direct.
The Cons of Blind Dropshipping
Let It Go
Where in a standard e-commerce relationship, you have control over the process – and the standards to which you hold your business for packaging, branding, and distribution speed, in a dropshipping relationship, all that control is taken out of your hands.
In particular, of course, you have zero control over the continued quality of the products you’re selling. To some extent, this goes back to the corner store ethos.
Smith & Son’s corner store has no control over the quality of the products at, say, Betty Crocker’s cake mix factory, but they still continue to offer them for sale.
The difference with dropshipping is that the products are sold through the store in such a way as to imply quality management to the customer, while actually offering the store owner no chance whatsoever of ensuring product quality maintenance.
That can mean the store takes a hit if the quality of the items it sells is inconsistent.
Increased Shipping Costs
Where in a standard e-commerce set-up, you can keep your shipping costs low – or increase them only when rapid distribution is requested and paid for – in a dropshipping relationship, you may have to increase your shipping costs because the items are coming from further away.
That can lead to your customers abandoning the items they want while they’re at the cart stage, because the shipping seems excessive.
This can be an extra-special hazard with blind dropshipping, because your customers remain unaware that there’s a third party involved or that they may be much further away from the customers than you are.
That unawareness means the higher shipping costs can seem particularly excessive, and they may try to find the item cheaper elsewhere.
Whether blind dropshipping is right for you will depend on whether you find a dropshipping company whose products and delivery record you trust to represent you and help you grow your brand as a store. If you can, it can be a great way to build an online retail business.