Looking for more advanced drop shipping tips? Make sure to check out Part 2: Intermediate Drop Shipping Tips after completing this article.
In the ultra-competitive ecommerce landscape, it is imperative for ecommerce retailers to find any edge they can. There are numerous ways to gain a competitive advantage, such as offering lower prices on products, selling items that few other businesses sell, improving back-end efficiency, and maintaining inventory levels. One of the most effective ways that ecommerce retailers can gain an advantage is by strategically drop-shipping orders to their customers.
Drop-shipping is a process where your supplier ships orders directly to your customers. There are many reasons why you should consider drop-shipping, such as improving customer service, warehouse management, and market-testing new product lines.
Benefits of Drop Shipping
If you happen to run out of stock on a popular item, you can have your supplier drop-ship products to your customers to avoid back-orders or cancellations. Happy customer are return customers, so maintaining a great relationship with your customers is a surefire money maker. This is one way drop-shipping can improve your customer service Click This Link. Drop-shipping can improve your warehouse management as well.
Warehouse space is expensive. If you are stocking very large items, they are taking up valuable real estate in your facility that could be used to stock smaller faster moving products. If you have products that do not turn quickly, they are taking up space that could be better used for faster moving products. One way to help manage your warehouse space and avoid overstock is to sell products that you do not actually stock in your warehouse. Those extra-large items that sit in your warehouse taking up space, have your supplier drop-ship them for you. Slow moving items, don’t keep them in stock. Instead have your suppliers drop-ship them to your customers. This allows you to continue offering the slower moving product while not incurring the cost of keeping them in your warehouse.
One thing all ecommerce retailers need to do is find new products and product lines to sell. However, it is risky to purchase a large quantity of an untested product. If they do not sell quickly, you are wasting warehouse space. Drop-shipping can be a great way to test out new products that you haven’t sold before by allowing you to sell the products without making a capital investment to house those items. If you find that you are drop-shipping a large number of orders for the same product, you may decide to begin stocking the product in your own facility. This may allow you to sell the same quantity of the items, with improved margins.
Keys to Successfully Drop Shipping
While drop-shipping can be a great way to provide excellent customer service, manage your warehouse space effectively, and test new products, there are three things you need to keep in mind in order to have the most success possible.
- Does your order management system generate purchase orders for your drop-ship suppliers? If you do not have an order management solution in place, or if the solution you do have in place doesn’t have processes built-in to help you drop-ship orders, it is a good idea to look into upgrading your system. If you have to manually create purchase orders for your suppliers to drop-ship products to your customers, you may lose much of the benefit of drop-shipping in time spent. The best order management systems have built-in processes to automatically generate drop-ship purchase orders and submit them to your suppliers.
- Are you able to sell these items and maintain margins? Most drop-ship suppliers will charge more to send an order directly to your customer than they will to ship products to your warehouse. This is typically due to volume discounts that you receive when purchasing large orders of products you intend to stock and ship from your location. The supplier typically receives a shipping discount for shipping in bulk, and they pass some of that savings along to you. However, when you ask that they send a product directly to your customer, they often have a higher cost for the item and a higher shipping fee that they also pass along to you. Know the difference in margin and make your drop-shipping choices accordingly.
- Remember your drop-ship suppliers offer the same service to other merchants. This means that even if you are able to get daily product availability updates from your suppliers, you must keep in mind that these products are available to many other merchants. It is not a good idea to consider these products as 100% available. Make sure that you work with drop-ship suppliers who have large available quantities of their products or can get more quickly. You don’t want to have upset customers waiting for weeks to receive the items they bought from you. This is also the reason that it is not recommended to offer products for sale on major marketplaces such as Amazon and eBay if you will only be having them drop-shipped. If your supplier runs out of stock, they won’t be able to fulfill your customers’ orders. This can have a negative impact on your seller ratings and can even lead to your accounts being suspended or shut down.
We hope this information was useful. If you are looking for more advanced drop shipping tips, make sure to check out Part 2: Intermediate Drop Shipping Tips
Monsoon Marketplace has been helping increasing sales and profitability on eCommerce marketplaces like Amazon and eBay for over a decade. From dynamic re-pricing to inventory management tools, Monsoon Commerce solutions puts you in control of marketplace selling.