We get a lot of questions about the risks and benefits of drop shipping, and we like to provide our potential clients with as much information as possible. Perhaps you’ve heard the hype surrounding it, and are wondering if it is something that would benefit your own business. When done correctly, it can be a vital resource to creating a highly profitable online business. When done poorly, it could irreparably harm your reputation, and ultimately sink your business. Let this be the guide that sorts out the details for you, and gets you started on finding the right solution for your online business.
Drop Shipping is a well-known and established inventory management technique where the seller does not keep the item in stock, but relies on a wholesaler or distributor to ship the items directly to the customer. The seller uses a website to promote items but does not physically handle the stock or merchandise. The drop shipper plays the important role of getting the item to their customers in a timely manner. It became nationally relevant with the rise of eBay, and businesses saw the need to find reliable third party vendors to ship their products.
It is actually a quite simple concept - instead of buying products that you wish to sell in bulk quantities and managing inventory - you simply partner with a wholesaler, select products that you wish to offer, and they can then be ordered on demand.
Benefits of Drop Shipping
The great advantage to an online business is that unlike traditional retailers, you do not need to invest in an initial inventory stockpile. This means you’re able to get in the game sooner, without the weight of heavy overhead bearing down your shoulders. Also, your business is less susceptible to loss of revenue as a result of changes in tastes or trends because you’ll have no such thing as excess inventory. Here are a few other advantages:
Often you have access to better shipping rates through drop shipping than you would as a small business shipping your own packages. Depending on the space you need, your monthly warehouse rental costs can cut into your profit margin significantly. You may even be operating your business at a loss. Why not let the drop shipper stock the products at their warehouse until your customer makes a purchase instead?
Greater Variety of Products
Drop shipping allows merchants to offer many more products for sale than what might be feasible if that merchant had to inventory everything. However, be sure to include only the products you think are related to your core ‘product focus’, and avoid promoting too many unrelated products on your web catalog.
You Can Run Your Store From Anywhere
The bare minimum you would need to run your online business is merely an Internet connection. This lets you operate from pretty much anywhere in the world, and allows you to travel as you please.
Increase Lifetime Value of Customers
With the ability to add new and expanded product selections consistently, you can keep your existing customers engaged, and returning to see what new items you’ve acquired.
Risks of Drop Shipping
Drop shipping may sound simple, but it is far from routine. It is a significant departure from the typical flow of how products gets to the consumer. Your systems and relationships have to be thought through differently compared to a traditional supply chain. The root challenge is that by attempting a virtual supply chain, retailers and suppliers face system-to-system challenges with integrations and automation to share product catalog data, real-time inventory feeds, and a coordinated consumer order life-cycle, so that consumer expectations can be met.
Be careful if you decide to search on your own. Clients have come to us with horror stories about disruptions from manufacturers that have run their businesses into the ground by slow delivery or sloppy customer service. Keep in mind, for the most part, the shipping process is out of your control and handled by someone you may not even know. If something isn’t done right, it will be your reputation and business that will suffer, so you need to be sure you are comfortable with the third-party handling your orders.
As an entrepreneur, you most likely have a version of the “control freak” gene, and may not be at ease relying on a third party to handle a major portion of your business, and provide a service that you can’t see. When doing it on your own, realize that the vetting process will take up a lot of your time, and it will also take trial and unfortunately plenty of error when it comes to finding the right manufacturer for you.
What Gooten Can Do For You
The risks mentioned above are the reason why we are in business. Our platform electronically connects to all of the best manufacturers around the world and offers technology products that automate and simplify access for our business customers. We can coordinate products from multiple vendors and locations, so that a consumer order can be broken up into multiple vendor orders, and in turn, consolidated back into a single consumer view, thus passing the savings on to your customer.
Our process for vetting vendors is intensely thorough, and we turn down a great number of manufacturers looking to work with us, if we at all hesitant in their ability to provide optimal service. Our quality speaks for itself, and we even offer free samples to clients interested in partnering with us. We visit each manufacturer in person, to see the layout of their operations, as well as making sure they are following honest business protocols, not employing child workers, or forcing their employees to work in dangerous conditions.
We realize the benefits of drop shopping could be exactly what you need to make your business thrive, so our mission is to remove all the pain points and headaches that would have come with the disadvantages mentioned above. With those out of the way, you are able to focus on the heart of your business - refining your ideas, and looking for new ways to broaden your customer base. Contact us today, and one of our representatives can detail how we can enhance your business today.