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The Ups and Downs of a Drop Shipping Business

For business owners, and especially those with eCommerce sites, finding ways to maximize profits while keeping your business growing can be a tough proposition. For many businesses, a drop shipping model of business has been a great way to grow revenue and product lines. For those just getting into the eCommerce business, drop shipping can be a great, low-risk way to open a store online. Still, problems could arise, so when deciding to go to a drop shipping model, certain considerations need to be taken into account.

What is Drop Shipping?

If you are wondering what is drop shipping and how does it work? The answer is simple; drop shipping is a method of offering goods for sale without the necessity for the eCommerce site owners to actually warehouse the items themselves. Instead of purchasing large amounts of items, companies partner with a drop shipping supplier and list their merchandise for sale, according to eCommerce Fuel.

The drop shipping supplier houses the products and will send them out to customers once an order is placed. Drop shipping allows website owners to ship orders placed on their websites directly to the customer via the supplier, according to Taming The Beast. The business owner does not need to worry about warehousing, packaging or shipping the products, and only takes the orders and sends them along to the supplier.

Benefits of Drop Shipping

Business owners discover many benefits by moving to a drop shipping model or starting out with a drop shipping model on a new website. A big upside is the very low overhead and risks associated with drop shipping. With drop shipping you don’t need to invest thousands of dollars in inventory. This can reduce some of the risk of starting a new business or can lower the expenses for existing ones.

Having a drop shipping supplier can increase the number of products you can offer while giving you the best prices on those items. Because drop shipping companies buy in huge volumes, they can offer the best prices on products and shipping. This will allow your business to be more versatile and give you a price advantage over your competitors. The aim of the drop shipping model is to give customers more options to choose from, including every possible size and color of a given product, according to Practical eCommerce. That may not be a cost-effective option if you are warehousing your own merchandise.

Drawbacks of Drop Shipping

While drop shipping may have its advantages, there are still factors business owners need to be wary of when deciding whether or not to move to a drop shipping supplier model. If your eCommerce site deals with more than one drop shipping supplier, it could be a headache. Most retailers work with more than one product supplier, but there is no common standard for order processing, according to Practical eCommerce. That means, as the business owner, you will have to figure out multiple ways of placing orders depending on how many vendors you have and their individual requirements.

Customer service is another factor to be wary of when making the decision about drop shipping. The shipping of the product and the speed with which it reaches your customer are out of your hands in the drop shipping model. When customers place orders they expect that the item ordered will ship quickly and arrive as described. But with drop shipping, that part of the customer engagement is handled entirely by the drop shipping supplier, according to Practical eCommerce.

While drop shipping suppliers are in the business of shipping items, they may not always be as forthcoming with the marketing materials that you will need to operate your site effectively. Some of these firms may feel that it is the retailer’s responsibility to provide marketing materials. That may mean coming up with product descriptions and high-quality photos on your own.

Is Drop Shipping Right for My Business?

Drop shipping is a great way to grow your business with less monetary risk, but it may not be right for everyone. The best way to find out if drop shipping is right for your company is to research the competition or find out what your customers want. You are looking for an underserved niche. Products that are harder to find online, and those that your customers are searching for on your site, are great candidates for the drop shipping model.

The drop shipping model of eCommerce has allowed companies to grow faster and to expand their product base dramatically. Increasingly, online retailers are using drop shipping to earn more profit than competitors who warehouse their own products. But switching to drop shipping is not a decision you should make for your company blindly. By addressing the issues of ordering systems, customer service and marketing before getting into a drop shipping supplier relationship, you can save time and money down the road while your business thrives.