Drop shipping isn’t necessarily as easy a solution as it sounds
When you are set an ecommerce business there are a number of logistical considerations to make. Where will you keep stock? How will you deliver it to customers? But there is a way that you can bypass these considerations: drop shipping.
Drop shipping is a popular technique used by online retailers which cuts the need for you to hold the inventory at all, products go straight from the supplier to your customers. While some hail it as one of the easiest ways to sell online, it’s not an option that will suit everyone and there are both plus-sides and down-sides.
What exactly is drop shipping?
It’s a fulfilment model that allows you to partner with a wholesaler who keeps the stock while you list their products on your site. When you make a sale you simply send the customer order to them with the shipping details and they send the items off.
There are a number of benefits in using drop shipping…
The start-up costs are smaller
If you want to set up an online business, usually you need a good stash of capital in order to buy the inventory of products that you wish to sell. In this case you don’t buy products until you have actually sold them.
Moving forward, it completely eradicates the risk of unsold inventory. You aren’t having to take a punt at guessing how much of a product you are likely to sell.
You can come to market quickly
Ordinarily when a retailer wants to start selling a product, they have to wait until the product has been shipped to them before they can offer it online. This way, as soon as you have decided that you want to add something to your product line – you can start selling.
You can offer a broader range
When you are buying in a certain product to sell on your site there are usually considerations to be make about how many colours or sizes you will offer it in for example. You simply might not have room to stock all of the options. This way you can offer the full range all of the time.
You can test new products without any risk
When you want to add extra products to your range, you often take a change in guessing what your customers would like to buy. If you have a drop shipping arrangement you can easily test the waters without making any investment.
It saves you time
Organising logistics can be a time-consuming nightmare. By using a third party to ship the goods you are saving yourself handling, labelling, packing, shipping etc. So you can focus on growing your business in other ways.
As mentioned, however, there are downsides…
Processing orders can be hard
Most people that sell in this way work with multiple wholesalers and each of these will come with different requirements for order processing, billing and shipping so it can become very complicated. The time between getting the sale and shipping the product can also be longer as there are many conversations and actions which must take place before it gets sent off.
You don’t have all of the product information
Firstly, as you never actually handle the products, you have no real idea what they are like. If the manufacturer doesn’t give adequate product descriptions, you have no way to pad out your own product pages.
Importantly you also never know if a product in out-of-stock until someone buys it and you find out that it isn’t available. This can be frustrating for customers who may have thought they had purchased something later to find out they didn’t. For this to work there must be an automated system which updates availability regularly.
Customer service issues
When you use drop shipping a large part of the customer experience is taken out of your control. You have no way to ensure the product arrives as described or on time. When a customer calls to complain or ask questions, the process is slower as you often don’t have the necessary information to hand and the query or complaint must go through a third party before being solved.
There is a lot of competition
When you find great drop shipping products they generally come with competition from other retailers. The margins of Drop Shipped products can be quite low because manufacturers will charge for the fulfilment service so you don’t have a lot of room to manoeuvre with price to beat your competitors.
As you can see, choosing drop shipping as an option isn’t as easy as it looks. But the problems that can arise with it can often be solved through planning and the implementation of an automated system or updates and ordering.
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I would like to remark that the choice of the dropshipper supplier is one of the most important keys to success.
Although there are lots of chinese dropshippers with appealing features, I would always recommend to work with a european dropshipper, assuming that your company is located in Europe. Risks are lower as the reactions are more agile, there are no hidden customs costs and the shipping time is much lower.
At BigBuy.eu we offer ‘chinese’ prices but with the guarantees of a european company. All of our stock is located in Europe, ready to be delivered by express courrier in 2/7 days depending on the country.
Another important think, as mentioned in the article, is the stock automation. BigBuy.eu offers the possibility of creating your own e-shop and to synchronise it with our catalogue, this way you don’t need to worry about updating the available stock.