uDroppy Co-Founder Carlo Bellati on the future of DropShipping

I wanted to personally share with you what I have learned in the last 2.5 years working in Tech for the Retail Industry and what is my vision of Dropshipping in the future to come.

We are now living in the Fourth Industrial Revolution. Welcome to you all!

Consumers are rising the bar of customer experience and it is getting more and more difficult to match their expectations, they live in the Amazon era. 60 days shipping time, what?!

Therefore it is fundamental to create a 1:1 relationship with each and every single client. This is a key factor to be a successful entrepreneur, you can no longer rely on your ability to find a new business by just creating the best Facebook ads with a catchy copy. That worked a couple of years ago.

Acquiring a new customer costs 4x than retaining an existing one

When I was working for Salesforce I realised why such companies made their fortune. It is because they were the first to find new trails, to navigate in what W. Chan Kim and Renée Mauborgne call “blue ocean”, avoiding competition by creating substantial changes into their business model.

I see Dropshipping as a key topic in most of the conversations about E-commerce, Affiliate Marketing and Digital Advertising. It is truly disrupting the industry and it gives everybody the possibility to do business online.

Before you had to buy products and sell them at a higher price, Today is about selling and then buying them at a cheaper price

However, I also see people who still don’t know that dropshipping is a business model and as such, it is just one variable that drives success.

As of today, drop shipping is often used by digital entrepreneurs to make money by buying cheap products from Aliexpress with the longest shipping time and then selling them to their customers. They forget about what I think is going to be the key to survive in this industry. They forget about branding.

Gateway companies such as Stripe and Paypall are not that happy when they receive a request to open an account from an e-commerce that uses dropshipping. This is because most dropshippers do not care about customer satisfaction. The Result? Blocked funds.

When I was working in Oracle and then in Salesforce I was used to have conversations with C-level executives of retail companies and I can tell you that the hottest topic in their minds was Brand Awareness.

When you build an e-commerce with Shopify or other technologies, you build a company, an asset. Therefore you have to aim for a long term strategy without trying to increase your margin at the expense of the customer’s experience.

A company is an organization that makes profit over time

My opinion is that from this year forward there will be a change in the industry. The ads pricing has been rising and today acquiring a new customer in your e-commerce can cost about 15$.

Dropshippers have to focus on Retaining and Customer experience in order to survive in this world.

Here below what I think are the key areas that you should look at to not only increase your e-commerce revenue, but also to be sure to have an high-long-term profitable business:

Increase Shopping Cart Value

Whatever is your current cart average value in $ terms, you have to work to improve it. Let’s say currently your customer’s average shopping cart is $ 40, you surely want to work to achieve $5–10 more.

Is it easy? Of course it depends on your current optimisation level. You can either have a really easy or really difficult situation to work on, but still: you have to work on that figure.

There are a few tricks you should work on:

• Create offers for purchase volume (ie: when you buy 1 o XX it costs $29, but if you buy 2 you pay $24 each and if you buy 3 you just pay $19 each). Chances are if it makes sense to have more than one of the product you are selling, customers will buy more units, growing your average cart value.
• Upsells are the key. When someone adds something to their cart, popup messages like: “customers buying XXXX are also getting this YYYY” should appear. Of course here it is really important to chose products that are somehow correlated. This is a best practice to increase the average value of the customer’s carts.
• Bundles are another great way to directly show potential customers they can have an advantage by buying products in bundles. Something like this: if you buy only XXX you pay $30, but if you also add this which is sold at $40 per unit, you will will pay only $ 49.
• Free shipping for all orders above $ 50.

These are just some advices of what works out there. What I always recommend to do is to carefully study what big companies such as Amazon do in their marketing. They spend hundreds of millions testing different combinations, text, colours, positions, offers and so on. The wheel has been invented, take advantage of it!

CLTV

CLTV means Customer Life Time Value and it is a metric you cannot afford to not focus on anymore. DropShippers often focus only on the first acquisition. What they do not understand is that selling to an existing customer is 5x times easier that to a new customer (if the overall buying experience is good, of course).

In other words, how many times does a customer buy from your store in one year? Just once? Two times? Ten times?

Let’s say you sell at an average shopping cart of $50 per customer. (At) the first sale you have the advertising cost that takes out a lot of the margin. But on the second, third, and even tenth sale, your margin will be huge!

You definitely want customers to come back and buy again and again. To do so you can apply a few tricks that I am going to tell you in another post.

Allow me, though, to tell you something in advance, the magic word here is: BRANDING.

NPS

NPS means Net Promoting Score and is a management tool used to measure the loyalty of a brand. It serves as an alternative to the traditional Customer Satisfaction or CSAT.

NPS is number that can be as low as -100 (everybody is a detractor) or as high as +100 (everybody is a promoter). Clearly what we are aiming for is a positive NPS; above +50 is excellent.

This metric explains how incline our customers are to promote our company to friends, acquaintances and family. In other words, how likely we are to get free traffic.

How do you calculate NPS?

Having a 1:1 relationship with your customer is a key factor. Welcome to the Fourth Industrial Revolution! Therefore you should send on a regular basis a survey to your customers with a coupon included if they answer to it.

We calculate the NPS with a very simple survey in which we ask just one question:

How likely is it that you would recommend our e-commerce/products to a friend?

The scoring for this answer is based on a 0 to 10 scale.

Those who respond with a score of 9 to 10 are called Promoters, and are considered likely to exhibit value-creating behaviours, such as buying more, remaining customers for a longer time, and making more positive referrals to other potential customers. Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviours. Responses of 7 and 8 are labeled Passives, and their behaviour falls between Promoters and Detractors.The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For the purpose of calculating a Net Promoter Score, Passives count toward the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score toward 0.

Let me give you an example:

#Respondents: 100
#Promoters: 30
#Detractors: 15
#Passives: 55

NPS = 30 (% promoters) — (% detractors) = +15

It is clear that my personal advise to you is to focus on Branding. Companies like Facebook where we rely a lot of our business on, want to create a better community for a better customer experience. In a recent article Facebook explained a new policy that aims to fight the “bad shopping experience”, which can cost customers and make them frustrated with Facebook, too. Shipping time, product quality and customer service are the three main areas that the big social network is looking into.

Like every industry, it evolves with time. Dropshipping is changing. Let’s be customer-centric, add value to everything you do. Long term business is the key and Branding is the only way to get you there.