What is the impact of dropshipping on the online marketplace?

Dropshipping is a model that has greatly influenced the online marketplace in recent years. It brings not only huge opportunities, but also pitfalls. Using the example of successful and unsuccessful entrepreneurs, we will show how it works, what it brings and what mistakes to avoid.

The story of Bohumír Hájek or the collapse of Sneaker Gallery

One of the examples of dynamic growth and fall is the story of Bohumír Hájek, who founded the e-shop Sneaker Gallery. Mr. Hájek started his business with sneakers that were hard to find on the Czech market. His success was based on commission sales in the form of dropshipping - he cooperated with companies that bought sneakers directly from manufacturers and brokered them to retailers like Bohumír Hájek. This model brought Hájek rapid growth because it reduced the risks associated with holding stock.

The company quickly gained a good reputation among resellers and end customers and the demand for his sneakers grew, which allowed him to open a brick-and-mortar store in Brno. With investments in marketing and media image, his company reached sales of around 80 million crowns in 2021 and accounted for up to 50% of all sneaker sales in the Czech Republic (CzechCrunch, 2022)

But then came the crash. The second half of 2022 rode a wave of increased interest in dropshipping and e-shops implemented this business model massively. Mr. Hajek was unable to react to this change. His company ended up in insolvency, owing tens of millions of crowns to over 60 creditors, according to publicly available data from the insolvency register. This story shows how important it is to have a diversified strategy and added value, something Hájek lacked.

What is dropshipping and how does it work?

Dropshipping is a model where a retailer sells goods to a customer without having them in stock. Instead, it forwards the order to a supplier who delivers the goods directly to the customer.

It is a business model where the seller does not buy the products in advance, but only orders them when they have an order from the customer. The goods are then shipped directly from the supplier to the customer. The retailer thus minimises investment in inventory, but depends on suppliers and their reliability. This model is particularly attractive for small entrepreneurs, as it allows a quick entry into the market with minimal capital.

Commission sales is a business model where the seller offers goods that he does not own and shares the proceeds with the supplier on the basis of a pre-agreed commission. In practice, this means that the seller does not have to hold the stock, but only brokers the sale. This model can also be implemented in the form of dropshipping, where the seller brokers the order and the supplier then ships the goods directly to the customer. In this way, the seller avoids warehousing and logistics, thereby reducing its costs and risks.

The story of the Konecnys and NanoSpace: Building a value-added brand

A positive example of a successful business is the group of brands of husband and wife team Lucie and Lukáš Konečná, including the NanoSpace brand. Their company started out as a small nano-technology business. But then the pandemic hit and they were ready thanks to nanotechnology. They started making nano drapes. Unlike many companies that imported low-quality drapes, NanoSpace relied on proven nanotechnology. This move brought them huge interest and high sales.

Unlike Mr. Hájek, however, the Konecnys took a different path - they invested the capital earned from the sale of the drapes during the covida pandemic in brand building and portfolio expansion. "We knew that the pandemic would end one day, just as every crisis always ends. We invested the profits in education and innovation, but also in stock and greener packaging," Lucie Konečná described in an interview with iDnes. They built their marketing on quality content, writing over 200 articles in a few years. In doing so, WebMedea estimates that they have covered more than 2,800 keywords in search engines, and the articles are a source of five-figure monthly traffic.

Within the NanoSpace e-store, the Konecny's now aggregate over a thousand products from dozens of brands. They used the overarching theme of health to create quality content, and now sell not only the anti-dust mite bedding they started with years ago, but also allergy cosmetics and air purifiers on their e-shop.

How TRITON IT helps with dropshipping TK Sport

Another example of a successful dropshipping business in the Czech Republic is Dušan Mihel, owner of TK Sport, which sells high-end bicycles and skis. Dušan entrusted us with the technical part of his e-shop, where we manage the feeds and integrate the dropshipping links. Thanks to our work, he can integrate tens of thousands of products from his suppliers directly into his e-shop, while maintaining control over product descriptions and prices.

Vid. 1: Interview with Dušan Mihel about TK Sport in the first part of the video, analysis of dropshipping by Mark Rost in the second part of the video (from 35:20).

We helped Dusan Mihel to implement automation that ensures stock updates and product availability according to his wishes. Thus, for example, when the stock is low, the system automatically informs customers that the goods are on order, which minimizes customer disappointment in case the listed stock of the dropshipping partner does not match the reality due to a late update.

We implemented automation on Dusan Mihel's e-shop to maintain stock and product availability exactly according to his needs. Thus, for example, if the stock drops, the system immediately informs customers that the goods are on order. This eliminates the risk of customers ordering something that is not actually in stock.

How does TRITON IT's customised solution differ from classic dropshipping?

Our dropshipping solution offers much more than a normal product upload to an e-shop. We create a tailor-made system that automates processes, saves time and increases efficiency. One of the key benefits is smart inventory management. Our system can regularly update product availability information, and if stock is low or items are unavailable, it automatically adjusts - for example, informing customers that items are on backorder. This minimises unpleasant situations where customers order goods that are out of stock.

Another big advantage of our solution is the protection of the client's own data. Standard dropshipping integrations run the risk of overwriting key data such as product descriptions, prices or meta-information during automatic updates. We have developed a system that prevents such overwrites, so the client can retain full control of their catalogue, including custom edits. This helps maintain a consistent identity while ensuring that products are always up-to-date.

Additionally, thanks to our advanced integration, we are able to address the challenges of synchronizing large numbers of products across multiple platforms and feeds. This allows our clients to easily and efficiently manage thousands of items without having to manually check every detail. Ultimately, our solution delivers increased flexibility, better control over e-commerce store operations, and increased customer satisfaction, which is essential for growth and long-term success.

How is the market changing and what does it mean for dropshipping?

The market has changed dramatically over the last few years. Product breadth and strong marketing are now key success factors. Companies that have a good dropshipping setup benefit from the ability to offer a wide range of products without having to hold inventory. On the other hand, companies that do not focus on diversifying their offer and building their brand can easily lose ground.

Our investment project, MISURA, is proof that properly implemented dropshipping can significantly improve business results. MISURA uses dropshipping to expand its product offering and we at TRITON IT take care of the integration and optimization. We have extensive experience with this model and can offer expert help and support to companies that want to implement or optimize this way of selling.