What is drop ship?
Drop shipping is a one-of-its-kind retail business model where a seller accepts customer orders without keeping inventory on hand. Instead, the seller forwards the order and payment details to a supplier, who then ships the product directly to the customer. This model is popular because it allows retailer to avoid investing in warehouse space, operational cost, or unsold inventory, and instead focus on other areas like marketing.
How Drop Ship Works
A fulfillment method that is growing in popularity, drop shipping can simplify inventory management for ecommerce sellers. It reduces storage and picking fees, plus it eliminates the risk of having items on hand that just won’t sell.
The customer places an order with a retailer. The retailer alerts the drop-shipping partner – either the manufacturer or the wholesaler – who packages and ships the product to the customer. The drop-shipping partner charges you, the retailer, for the service, and you charge the customer.
Advantages Of Using Drop Shipping Services
Drop shipping and fulfilment services can be a good option for the ecommerce industry where retailers are required to maintain a warehouse, inventory, operation costs, shipping costs, etc. Here are a few reasons.
- A drop ship vendor (DSV) offers a low-cost option for maintaining inventory and shipping options.
- It’s almost no operation cost for retailers, risk on item maintenance, allocation, shipping is on DSV.
- Retailers can spend less time on the item management, and instead, can focus time on marketing and expanding their business.
- Some DSV allow retailers access to their system. This is one of the ways retailers can track orders and shipments.
- Retailers do not need a physical location to store products which can otherwise be costly and demanding to manage.
Drop Ship Business Challenges
With drop shipping, there are some challenges:
- Building brand value while selling products via third party retailers
- Finding an appropriate retailer to sell your product
- Product marketing
- Wrong item/quantity sent to customer
- Handling shipping and operation costs
- Dealing with customer returns
- Dealing with out of stock items
- Shipment delivered to a wrong address / Orders got confused
- Item arrived damaged
- Wrong tracking number
How To Solve Drop Ship Issue by Using Technology
One of the biggest challenges is building brand value. It can be hard to stand out from the competition since most DSV offer the same products in their stores. It can be difficult to differentiate with others DSV when a product catalog is similar. So, we need to find ways to make products distinctive and more attractive than competitors.
On that note, there are a few ways to overcome this challenge:
- Building a customizable websit.
- Marketing your product via email / blogs / affiliate / ads ( Facebook/Google, etc.)
- Exceptional customer service
- Private label DSV – This enables DSVs to ship products from suppliers directly repackaged with our branded packaging
- White label DSV customization options – DSV can also leverage white label customization options. With white label customization, DSV can personalize things like packaging. As a result, customers get the sense that they are purchasing from a specific brand rather than a supplier.
Next, a challenge as DSV is finding reliable and trustworthy suppliers. Finding suppliers that can be relied on is key because then we can ensure that our product is credible.
Furthermore, DSV also need to consider what makes a supplier reliable. A reliable supplier has solid and fair business policies and offers good quality items, ensuring the customer is satisfied with their purchase.
With that in mind, there are a few ways to find trustworthy suppliers:
- AutoDS-supported suppliers – DSV can work with AutoDS-supported global suppliers. This is a great way to ensure DSV are sourcing from dependable suppliers. Notably, this collection of suppliers are the best to work with because they pass all the necessary requirements. Plus, when working with them, DSV can automate the business.
- Reviews
- Product range
- Business policies
- Domestic & International warehouses
- Customer service
Another challenge retailers face is long shipping times and delays. Since shipping is handled by DSVs and not the retailer, the Retailer doesn’t have much control over it. Interestingly, different suppliers have different processing, billing, and shipping policies, so shipping times vary. This can be a challenge when we are sourcing from overseas suppliers.
The most important thing DSV need to do is have clear and honest communication with both supplier and our customer. Thus, we need to set clear guidelines with our customers about the shipping times. And, we need to set solid ground rules with our suppliers regarding shipping.
Additionally, retailers must find suppliers with domestic warehouses in the markets we dropship in. Consequently, this allows us to cut down on shipping times as well as on delays.
Moreover, a challenge that DSV need to learn to manage is running out of stock. Uniquely, because we don’t handle suppliers inventory, we don’t have much control over stock availability. As a result, offering a product that is out of stock may turn away potential customers.
However, there is a way to overcome and handle this dropshipping challenge. Utilizing an automated stock monitoring tool will help us avoid losing sales. For example, if our supplier is out of stock of an item, the AutoDS tool automatically won’t let us import the product into our store.
Plus, this is why retailers and DSV should work with multiple suppliers and other DSVs. By working with multiple suppliers, if an item goes out of stock from one supplier, DSV can find that item from another supplier. Thus, DSV can ensure they always put customers first and providing the best service possible, even if we are out of stock.
Another drop shipping challenge is customer product returns. Actually, it can be difficult to navigate product returns. To elaborate, because retailer don’t hold or ship the products, the returns must go through DSV and or supplier. As such, it can get tricky to handle returns.
This is why retailers need to offer exceptional customer service. Notably, with great customer service, we can put our customers at ease when dealing with returns. As a result, this clear line of communication allows for a smooth product return process.
Additionally, we need to have clear business policies. On our drop shipping store website, we need to clearly state both the shipping and the returns policies. Consequently, this allows us to inform the customer of their options and protect ourselves.
