If you are new to drop shipping, check out Drop shipping Part 1: Introduction to drop shipping, for an overview of drop shipping and why an eCommerce merchant would want to setup a drop shipping workflow.

Drop Shipped Package You’ve entered the competitive and lucrative space of drop-shipping and chances are you’re starting to see challenges. Drop-ship workflow refinement is a constant battle because competition is always on the rise. Platforms such as Shopify and Bigcommerce allow merchants new to e-commerce to scale up a professional looking store in less than a day, and with just one drop-ship vendor, those merchants can become competition in a week’s time. Here at Monsoon Commerce, we want to share some tested tips that could help with your bottom line.

Supplier on-boarding and relationship management

Being picky about your suppliers before on-boarding is crucial. Several research points such as reputation in the field, average/lead times to ship, and same day shipping cutoff time should be on your radar when selecting suppliers. Suppliers themselves can also be picky about their merchants, often having minimum requirements before accepting them. These requirements could be SKU count, sales volume, and time in a particular vertical, so you may want to have some reports ready when you enter initial negotiations. [Editors note: We also suggest downloading our Increase Sales with Smarter Inventory Management White Paper for more tips on tracking inventory and supplier metrics.]

Shipping rate comparisons

Drop-ship suppliers will often work with you on shipping. If a drop-ship supplier will allow you to use your UPS/FedEx/LTL provider, make sure to contact your account representative at the logistics company first. If you plan to use your own account for freight billing, make sure that you negotiate the best possible rate with your representative and for billing purposes – use a points or cash-back credit card. By leveraging special rates for shipping, and using a payment method that rewards purchases, you can defray any extra costs from the drop-shipper.

Tactical geographic drop-shippers

Many drop-ship suppliers have access to similar supply lines which you can use to your advantage. Having a network of suppliers across the country will allow you to tactically route your drop-ship order to the supplier closest to your buyer. In fact, some suppliers will have multiple distribution centers. If you’re working with a supplier that has multiple distributions centers, confirm with them that you can submit drop-ship orders to the warehouse closest to your customer.
Yes, this adds some work, but it can be alleviated by using quick filters, complex approval rules, and review reasons. Depending on the dimensional weights of the items in question you could see some colossal savings.

Return management

If you’re already using drop-shipping, you’ve probably had some experience with a damaged or unwanted non-stock item showing up at your warehouse. Most drop-shippers will include your own packing slips on the outbound parcels that show your business address, increasing the chances that you’ll end up with non-stock product. One method of handling these returns in your order management system is to receive the returned stock and build an order to be shipped back to your drop-ship supplier. Keep in mind that each supplier will likely have their own return policy and may charge restocking fees. Customer service and keeping returns to a bare minimum is truly the best form of managing this scenario. Make sure your drop-ship packing slip has clear, concise return instruction and that you closely manage the associated RMA.

If your OMS supports it, you have the option to keep the returned, non-stock item in your warehouse and have the OMS automatically allocate that item to the first order placed, either online or over the phone. One the item(s) is allocated, the OMS will resume treating additional orders as drop-ships.

Tracking information

Customers need closure. You can provide that with a tracking number. Make sure to have clearly defined responsibilities and instructions with your drop-shipper to receive tracking information in a specific format by a certain time. You’ll then upload tracking to your order management system which will close the drop-ship PO, update and close the order in the order management system, and update the customer account online, automatically.

We hope this information was useful. Have questions? Please contact us anytime.

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.

Airmail photo in this article is courtesy of Beck Gusler