Drop shipping is a retail method where, instead of the retailer keeping their own stock of items that they sell, orders are sent on to a third party. The third party then sends the selected items on to the customer. The retailer makes their profit based on the difference between the price they sell to the customer at, and the wholesale price that they pay to the third party.
Why is drop-shipping Good?
There are quite a few advantages to using a drop shipping service when getting set up in business.
- Wide variety of products – setting up using a drop shipping system means you can offer a huge array of products at the outset. As a result you can have a greater number of product pages which increases the chances of a new customer landing on your site via a search engine.
- You will not have to build your business to the point where you have the upfront finances in order to hold a large variety of stock items.
- You can offer your customer’s expensive luxury items without having the funds to keep these items in stock yourself.
- You will save time that would have otherwise been spent in shipping an item from the wholesaler to you, allowing you to get an item up for sale on your site more quickly. This can make you more competitive than businesses operating using traditional methods
- You will also save you the time you might have spent on administration and inventorying your stock. You will also save the time you may have spent on packaging items and physically shipping them to customers
Why are drop-shipping Bad?
As with anything there are also downsides to using a drop shipping service.
- Be careful about the prices that are offered to you by wholesalers. Prices can vary enormously so make sure you shop around to get the best wholesale deal.
- Make sure you know all the fees up front before you get started. There can be some unpleasant surprises along the way such as ‘participation fees’ or charges for individual transactions
- Issues can arise where the drop shipping service runs out of stock of items but fails to communicate this to you. You are then in a position where you have taken an order via your ecommerce site but are unable to fulfil it. This can lead to bad reviews for your business.
- Difficulties can arise when an item needs to be returned. An easy return policy reassures customers that if there is a problem with their purchase it can be set straight. Using a third party drop shipper can complicate this process and it is important to clarify what the policy is regarding returns before agreeing to a contract
Drop shipping can be a quick and simple route into ecommerce but as you can see, it is vital to iron out any problems before you start trading. Neglecting to do this could leave you with dissatisfied customers and bad reviews that can damage your ecommerce business and leave you with few sales.