If you’re working in the world of ecommerce, you can’t go very far without hearing the term “drop shipping.”
What Is Drop Shipping?
Well, a typical online store has a certain catalog of products that they sell. The store gets these products from a manufacturer or wholesaler at wholesale prices. They’ll gather up inventory, wait for an order to roll in, then fulfill the order and ship out the product to their customers.
Drop shipping adds a degree of efficiency to this process by taking the inventory and fulfillment parts out of the hands of the shop owner and putting into the hands of the wholesaler (or less frequently, the manufacturer).
Who Is Drop Shipping Good For?
Drop shipping is a process utilized by a wide range of businesses. Some major retailers like Sears have implemented drop shipping. It’s also widely used by sellers on eBay and Amazon.
But drop shipping can also be great for small ecommerce businesses. One of the most difficult things about having an online store is knowing how much inventory to keep around, and finding a place to put it. And especially if you are running a one or two person operation, fulfillment and shipping products can be a huge time suck.
Drop shipping eliminates both of these problems by letting a drop shipping supplier take care of storing the inventory and shipping the products. Most will even utilize private label shipping, so customers will never know the difference.
By the way, this is also a great model for wholesalers since it allows them to move a lot of product very quickly.
What Are The Downsides?
Drop shipping is not without its flaws. As with most business models, there are upsides and there are downsides. But with a little homework and elbow grease, the kinks can be worked out.
For one, it can be difficult to find a supplier in the first place. Wholesale suppliers don’t exactly invest a lot of time and money in SEO or building great websites. You will likely have to click through many, many, many pages of Google results to find a drop shipping partners that might work for you. Their websites will probably be poor and may not have all the information you’re looking for, so you’ll almost certainly need to speak to someone over the phone. When you do, make sure you ask what their fee structures and policies are like, and compare answers between different companies so you get an idea for what is standard.
When you do manage to find a drop shipping supplier you’d like to work with, great! Now go ahead and start the process over, because you’re going to need a few.
It’s not a good idea to rely solely on one drop shipping provider. Because they move products so quickly, you’ll likely need several partners with overlapping product offerings.
And if you can find multiple drop shipping suppliers who sell the same or similar products, well, so can everyone else. Some of these suppliers have a ton of competition for their products, which can lead to out-of-stock items or incorrect inventory listings, so you have to be prepared to at some point end up selling something that is actually out of stock, and have a plan for how you can make it up to your customer (future freebies sometimes do the trick).
All that competition for products can also lead to some very harsh pricing realities and low profit margins (though this can vary greatly depending on what you are selling). As such, you’re going to have to find other ways to show value to your customers other than simply being the cheapest seller around. (Good thing you just freed up all that time by not having to order inventory or deal with fulfillment! Now you can put that spare time toward things like service, product education and content creation to add that extra value.)
Drop shipping is not going to be for everyone, but it can be a great way to expand product offerings and free up time, which is especially useful for small business owners, who end up having to do so many things for themselves. 10twelve was born out of our experience launching and growing our own businesses. We wanted to take those lessons learned and share them with our clients. Want to discuss marketing or business strategy for your business? Call us today!