I’m working on a side project with a friend (/my brother in law) that connects suppliers and brands to dropshippers. It’s a business model that’s been done before – we’re just taking an existing model and fine tuning it, maybe making it more Australian. It’s called Elvenda.
We’ve got a functioning beta at https://www.elvenda.com. I’m still working on developing the back-end for a few hours a week here and there. My brother in law is spending an hour or two a day reaching out to potential customers. We’ll criss-cross on all that over time, we’re both developers and both wear a lot of hats.
It’s a slow burn. We know there’s a market here, we’re not 100% sure how to reach it yet, and we know we need to slowly stack bricks on it for a few years.
I’m writing about the pain points that customers have raised so far, and the issues with the model we’ve chosen and dropshipping in general. We both run or have run e-commerce stores currently or in the past, so we’re aware of the general problem domain.
Issue 1: Cheapening the brand
Here in Australia, Amazon hasn’t decimated online retail. We’ve got strong brands, and it’s not uncommon to make a reasonably high value purchase from a store you haven’t heard of before. We’ve got strong consumer laws and clear paths to resolution if there’s an issue. Not least of which is PayPals buyer skewed policy.
Not surprisingly, online stores in Australia are terrified that sometime soon, Amazon will wipe out our online retail margins. So brand owners are terrified that we/Elvenda will help contribute by making dropshipping fairly easy, and making it easy for dropshippers to knock the margin out of products.
Scenario 1: Supplier makes product with RRP of $100 available for $60, dropshipper sells for $62, now we’re all fucked.
Scenario 2: Supplier makes product with RRP of $100 available for $60. Market sees that somewhere in the supply chain it’s available for $60, market demands the product for $62, we’re all fucked.
These are slightly different – scenario 1 is about the availability of the product at a price, and scenario 2 is the market knowing about it.
When potential customers of Elvenda started saying to us that this service was going to cheapen their brand by blowing away margins, we weren’t really sure how to fix it. They’re right – it’s a certainty.
The other issue we’re lumping under ‘cheapening the brand’ is availability of products. Some products have a scarcity about them – they are only available at niche stores in Berry or at a one of a kind store in Sydney. If the products are appearing on eBay now, the magic of the brand is dead.
How we’ll make sure we don’t cheapen the brand
To summarise, here’s the issues. Over-availability of a brand’s products. Availability of brand products significantly below RRP (enough to damage). Market awareness of margin in brand products.
Here’s how we’re going to fix it.
Brand product availability
A supplier or brand owner who lists their products for sale on Elvenda has total control of who will be able to dropship their products. A dropshipper needs to apply to a supplier, and the supplier can vet the store to make sure it represents their brand values and manage their own product scarcity with this process. Only want to be sold in high-end stores? Fine, only approve high end stores.
Protecting supplier and dropshipper margins
A good supplier on Elvenda can offer their products at a list price where the supplier can make a healthy margin and so can the dropshipper. We don’t want to punish the supplier by setting up our platform for dropshippers to screw their margins away (by selling the previously mentioned $100 RRP product for $50).
Since both the supplier and dropshipper are connected by our platform, the solution to this is simple. We won’t accept an order from a dropshipper who has sold the product below the agreed minimum retail price. There’s no circumstance where a dropshipper can sell below the minimum that a supplier has specified. Fixed!
Protecting availability of trade/list pricing
This is a less important issue and a harder issue to fix. A reasonably awake consumer knows that every stage of the supply chain takes a cut, and a $100 product started life as a few $1 components.
We certainly don’t want to be the ones leaking this information to consumers however.
Brands and suppliers listing their products on Elvenda will have their trade/list pricing hidden from potential sellers/potential dropshippers if they require approval. Only once the supplier has approved the dropshipper will trade/list pricing become available.
We can’t protect the information after that of course, but we’re doing our part to make sure that we aren’t leaking this information to dropshippers with prying eyes 🙂
Cheapening the brand ended up being a long article in it’s own right, there’ll definitely be more as we keep getting to know potential users. The app is at https://www.elvenda.com, and it’s for connecting suppliers to dropshippers in the easiest (read – most automated) way we know how.