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Is Drop Shipping the Right Model for Your eCommerce Business?

December 21, 2016

Image: Droptech.net 

 

Drop shipping remains a hot topic among eCommerce operators - though it has many benefits, it is not necessarily the best option for every business.

 

If products are bought for resale, usually they need to be bought in bulk, delivered to a warehouse and then sent to a customer - when a sale is received. The drop shipping model is different - here an e-tailer does not usually have to meet minimum purchase requirements, and the wholesaler ships the item directly to the customer on their behalf.

 

For a new business without a lot of operating capital, partnering with an established wholesaler who is willing to offer drop shipping allows the new business to list a large number of products to invest in purchasing and storing the products. This is a huge benefit to new businesses with limited capital.

 

"Using a drop shipping model is a great option should you have limited funds to start with", write Jeremy Hanks, Nichole Haims and Brandon Williams at Drop Shipping for Dummies.". "You don't need to purchase any stock until you've been paid - so drop shipping is a superb way to break into eCommerce with a lean budget."

 

Some Pros & Cons of the Drop Ship Model

 

PROS

  • No requirement for the business to carry inventory, eliminating the need for substantial capital

  • Allows a new site to be up and running very quickly

  • No requirement to warehouse, or for fill your own garage with merchandise which you may never sell

  • Many drop ship suppliers also give eCommerce retailers the option of buying in "light bulk" for better pricing, as they grow - a kind of compromise between traditional bulk and pure drop shipping

 

CONS

  • There are plenty of low quality and even fraudulent drop ship suppliers to beware of

  • As drop shippers don't own the stock, they generally cannot control packaging or include marketing materials that encourage repeat purchase

  • There are various fees from different drop shipping suppliers, so would be drop shippers should do their homework

  • Generally speaking, drop ship eCommerce stores will not enjoy as competitive a cost price as larger eCommerce buying stock in bulk up front

  • Customers purchasing a mix of products that the drop shipper sources from different vendors may, incur higher net shipping costs making the drop shipper less competitive

 

Joseph Crimi, proprietor of Sportsmen Express, established his online shop in 2004. He said he did a substantial quantity of research to find a partner that can fulfil his firm's needs.

 

"I had been looking to supplement my income, so that I did not need to take inventory and mess with shipping the goods," Crimi stated. His website is fully incorporated with his provider, Green Supply, to efficiently process orders and update his website since Green Supply adds merchandise stock.

 

"If everything is running smoothly, it's a hands-off procedure," he said. Crimi picked Green Supply because he said it was the only drop shipper that he found in his market that was able to incorporate his company's name into the package being shipped to the customer.

 

Locating quality drop-ship partners can be a lengthy and complicated process. Chris Malta, product sourcing editor at eBay Radio and author of The Drop Ship Source Directory (offered at Worldwidebrands.com) advises eCommerce businesses looking for suppliers to avoid the word "drop ship" on popular web-search engines. He said few valid drop-shipping firms would list this is a service - you need to be creative and do your homework.

 

"Drop shipping is a hot key word and many companies use the time, even if they are not fully set up to offer the service", Malta said. He says the perfect way to start a legitimate eCommerce business based on the drop ship model is to contact regular suppliers in your niche directly, and inquire if they provide this service, or buy a resource like The Drop Ship Source Directory where firms have been vetted to work with online businesses.

 

Sources: Practicalecommerce.com

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