While drop shipping offers many appealing advantages and convenient features for any start-up e-commerce company, there are inevitable drawbacks to consider as you iron out the details of your business model. However, as long as you are properly prepared to combat potential flukes and flaws that may come your way, then you will likely find yourself a part of an extremely lucrative business venture. From selecting a profitable niche of products to market to product management to working with reliable and reputable drop ship wholesalers, there are a number of factors to weigh prior to delving into a drop shipping business.
First things first: Invest your resources into marketing a niche of products that has the potential turn profitable. Because you’re not ordering items in bulk quantities and because you’re having individual items shipped directly from the supplier’s warehouse, you will likely experience an increase in costs. To compensate for your costs, retail and price your items strategically so that you still effectively gain margin points. Ask suppliers or sales representatives to conduct product trainings and demonstrations so that your service team is both knowledgeable about and comfortable with your virtual product catalog. Require that suppliers and manufacturers send along informative collateral and product-related materials that can serve as on-call reference points for your service team. Product familiarity may translate into fewer returns, and ultimately, more satisfied customers. Satisfied consumers can signify higher customer loyalty and retention rates.
While drop shipping eliminates the need for warehouse space and shipping docks (at least as you begin your business), it can pose potential problems in regard to product management. When you establish a drop shipping relationship, you virtually relinquish control on a number of levels throughout the buying cycle. You may not always be aware of back-ordered items or discontinued product. In order to minimize the chance for miscommunication at this level, request weekly inventory sheets from the supplier so that you’re both on the same page. Although you have opted to leave the supplier with the responsibility of packaging and shipping the product, you are inevitably held responsible for the quality of the product. From packaging to delivery, you will be the point of contact for your customer. While the entire delivery process can be concerning, there are several precautions that you can take in order to measure the credibility of the supplier. Do a few test shipments with the supplier to gauge potential damage ratings or the likelihood of shipments being lost in transit. Have the supplier send you various products, so that you can see first-hand how different types of items are packaged.
Pay close attention to the nuances of particular drop ship wholesalers, including monthly fees and lead times, so that you can preview the future of your potential partnerships. Create a black and white terms and conditions agreement that clearly outlines how and by who returns, back-orders, and lost or damaged items will be handled. As with any large undertaking, careful research and focused planning will dictate the success of your business.
While drawbacks are virtually inevitable in any situation, they can be easily avoided with proper preparation. In regard to getting involved in a drop shipping business, you must first ensure that your product offering has a chance at being profitable and appealing to a large audience. From here, work to establish legitimate relationships with credible drop shipping wholesalers and sales and profits will inevitably follow.
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