So there’s this entire ongoing buzz about ecommerce and online selling and online shopping and all that. Everyone says it’s easy to startup but has your experience been otherwise? Or are you looking to expand but don’t have the necessary resources for it?
Heard of drop shipping? Be it insufficient capital or inadequate resources, drop shopping could be the answer to your woes. Get a hang of it and you could join the ecommerce bandwagon too, provided you get a good grip on the right person. Confused? Read on for answers to all your questions about drop shipping.
What is Drop Shipping?
Drop shipping is a retail method in which sellers do not keep stock, but partner with a wholesaler or manufacturer to pack and ship products. For example, you as a seller tie up with wholesaler/manufacturer A, who keeps stock of bags and wallets. Once you receive an order from a customer, you transfer the order and customer details to A. He will then pack the product and ship it to the customer.
Simple? A lot of online retailers already follow this and have seen their businesses flourish manifold.
Why should you consider drop shipping?
More profits– Profit margins are higher as you buy directly from wholesalers or manufactures, meaning much lower rates than buying from others in the market.
No inventory hassles- You don’t need to think of space for inventory or have upfront capital to invest in inventory.
Wider product offerings– As you don’t need to store inventory physically, thus eliminating storage issues, you can include more products in your portfolio and thus expand your business.
Easier market entry– You can start your business sooner as you don’t need to consider investment or time required to set up.
Explore new products at minimum risk– Your expense is only the cost of listing. You can leverage on this to try out selling more products. You can afford to stick to these product offerings or not, based on customer responses.
Convenience- Your only operational aspect would be listing the products and as long as it is a trusted drop shipper, you can be assured of orders getting fulfilled on time. This frees your time to concentrate on equally important aspects like marketing and customer service to get your business moving forward at the pace you want, a big blessing especially if you have limited resources.
Mobility– You can enjoy ecommerce in its true form- anytime, anywhere. With no physical storage or fulfillment hassles, you can operate your business from anywhere.
Too good to be true?
Like everything else, there is a flip side here too. Drop shipping is not without its share of challenges, but they can be managed or kept at bay with some planning, thus ensuring smooth running of your operations.
Competition and margins– These products tend to have a lot of competition as one drop shipper could be supplying to many people, meaning many others would be getting products at the same rate as you (But that’s the case with procuring products from any supplier right?). Just competing on price wouldn’t be practical. Ideally, you would need to figure out niche spaces to sell in or provide value-adds to grab customer attention.
Out of stock situations– As the inventory is not in your control, sometimes out of stock situations come up. You could either work with multiple drop shippers, so that you can contact B for a product if A is out of it, or you could work out a system with the drop shipper to sync inventory (This is not a practice that’s followed).
You don’t see the products– It is harder to sell products which you have not seen. But since the Internet today is flooded with information, getting hold of what your product is all about shouldn’t be a problem. But you need to ensure the drop shipper you tie up has credibility so that the products sent to customers are genuine and in good condition.
Errors and logistic hurdles- You have to be prepared for the occasional errors and problems, and make amends when needed. Sometimes this would mean added costs for you, but compromising on it or haggling with drop shipper will only make you look amateurish and translate into negative reviews for you from the customer.
How to choose right drop ship partner?
To get the right benefits and advantages, it is important to consider certain points before narrowing down on one drop shipper.
Credibility– In addition to a thorough check of his track record, ask him for essentials like Sales Tax certificate, VAT Registration, CST Registration, Wholesale License and clients’ list.
Profits– After you have checked out the stock and worked out the supply chain, consider the costs involved to price products accordingly on your listing. You should partner with someone who doesn’t overcharge you so that there are enough profit margins for yourself.
Delivery– Different providers have different delivery times. It is better to avoid the ones who regularly delay deliveries, as it would affect your brand reputation.
Product warranties– Understand the warranty and replacement policies before signing contract, and there should be a clear definition of who handles replacements and returns. Customers wouldn’t appreciate having to deal with a third party.
Will drop shipping guarantee overnight success?
Not really. Just like any other model of business, you will have your time in marketing and building customer traffic. However, drop shipping will give you an easier route of entry into the ecommerce space and make it easier for you to explore and find your forte.
Have you used drop shipping? How has your experience been? What drop shipping methods have worked for you?