What is Dropshipping, and Is It Sustainable?

During COVID-19, Strategic Sustainability Consultants saw an increase in the number of dropshipping companies around Australia.

Dropshipping is a business practice particularly successful for e-commerce stores. In the case of dropshipping, the seller does not stock the items. Instead, the purchase items Wholesale from a third party. These items then get sand from the third-party directly to the customer.

There are many reasons that new businesses are turning to dropshipping, including low start-up costs and low overheads with a wide selection of products that you can sell from the comfort of your own home.

However, from a sustainability perspective, there are a number of issues with dropshipping. In this article, we talk about these issues and provide ways in which you can work towards addressing them.

1. Business ethics

If you are operating your dropshipping business ethically, one of the downsides of this is the low margins. Having tried a couple of dropshipping sites myself, I have noticed a trend of some to mark-up prices ridiculously high. Some businesses I have seen try to charge $150 for a $30 product or $650 for a $200 product. This instantly smells like a scam to the savvy consumer. Therefore, it is important that the first principle of owning a dropshipping company is to act with good business ethics. With the availability of sites such as Ali Express selling at wholesale prices directly to consumers, it is difficult to justify a mark-up of 500%. While there are no legal restrictions around this, it is not sustainable for your business and could be seen as somewhat unethical.

For this reason, we encourage you to keep the mark-up minimal, research the availability of these products available directly to customers on other sites. What price are they? Are they charged at wholesale prices or retail prices?

If you still want to make a significantly bigger mark-up, consider drop-shipping may not be for you! There are still other great ways to import goods and sell them. For example, you might add a particular finish to an imported product which makes it last longer. You might add a unique design to it to make it exclusive only to your store! The possibilities are endless.

2. Say no to plastics!

A lot of the dropshipping I see done nowadays uses A LOT of plastic materials. From plastic packaging to plastic products, the impact many of these products have on the environment is quite detrimental. Instead, consider speaking to your supplier about the eco-options available to your customers. Do they have an eco-friendly shipping option by using compostable postage bags or cardboard instead of plastic? Is it completely necessary that products are wrapped in plastic? Or are there eco-options for products? Can bamboo be used instead of plastic? Is there a chance for eco-nylon to be used instead of regular nylon?

3. Consider the miles

While dropshipping can be better for the environment in terms of distance travelled (direct from wholesaler to customer, not via retailer), it’s still important to consider the product miles. Could you offset CO2 emissions by offering an upgrade to carbon neutral shipping at the checkout? Does your supplier already offer this? These are important questions to think about and ask.

4. Working conditions

This applies to any wholesale business - find out about the working conditions of the people who make the products. Are the employees receiving a fair wage for their work? Is there a different supplier who can ensure a fair wage for their employees? Contributing to unfair working conditions for people around the world causes ongoing issues with inequality within and between countries. If you cannot find a supplier to guarantee you a fair wage, consider working with someone you have a good relationship with to guide them through making their business more ethical and sustainable to assist you in ensuring your business is more ethical and sustainable.

5. Australian manufacturing

In Australia, we hear a lot of rhetoric around supporting Australian manufacturing. This is especially important due to the impact of the COVID-19 pandemic on businesses, workers and their families across Australia. At Strategic Sustainability Consultants, we always recommend supporting small and local businesses wherever possible. Consider working with Australian suppliers, especially Australian SMEs, for your dropshipping business to support the local economy. Not only does it mean fewer air miles, it means you are giving back to the community!

If you have a dropshipping business or if you are interested in establishing one and need some advice on your next steps, especially when it comes to sustainably building your business, contact us today!

This article was originally published on the Strategic Sustainability Consultants website.