Drop shipping is an approach to order fulfillment that frees a retailer from keeping product in inventory. Instead, vendors can rely on the source company, such as wholesalers and manufacturers, to ship these products to the vendor’s customers. This arrangement has a number of benefits that make it a popular option with online and direct-mail merchants.
How Does It Work?
When a customer submits an order, the retailer processes the order and accepts payment, then, according to systems in place, either digitally or manually submits the order to the product source along with payment and customer information. The product is then sent directly from the source warehouse to the customer. All parties are satisfied and the retailer makes a profit from the difference between what the customer is charged and what is paid to the product source.
There are definitely a lot of reasons why a retailer should look into drop shipping, here are 5 to get you started:
1. Save Time
With drop-shipping services, the retailer doesn’t have to spend the time and effort of receiving, storing, inventorying, and picking and packing products for shipment. Instead, these time-consuming tasks are done at the product source, which means the retailer has more time to focus on marketing and growing sales. Especially for smaller, startup companies with few employees, that extra time can make a world of difference in the long run.
2. More Product Options
This arrangement gives the retailer the opportunity to sell a wide variety of products that would be impossible to inventory with limited warehouse space and labor. This is of great benefit to online merchants who may do business without having any storage at all. Retailers can sell hundreds of products without touching a package. There are numerous wholesale and manufacturing companies all around the world selling an almost unlimited range of products. Drop-shipping services can enhance the process through different features, such as order tracking, printing and applying specific retailer labels, and online account management.
3. Quicker to Market
Drop shipping reduces wait times. It takes the same amount of time to post a drop-shipped product as it does to post one you have in inventory. Having to maintain inventory levels can be a tricky process as it’s subject to fluctuations in supply and demand. Often a product has to be backordered. Having them shipped directly from the manufacturers eliminates these delays and creates better customer satisfaction. Developing your own products is even more time consuming, whereas any similar product offered by a drop shipper can be advertised at once.
4. Lower Investment
The main concept behind drop shipping is that it eliminates the need for keeping products in inventory. Drop shipping generally doesn’t require any special membership fees or investments, so retailers with a product source can simply start selling them. It also eliminates the facility space and labor that would be needed to maintain a varied inventory. Entrepreneurs who opt to market drop-shipped products can start a retail operation at a very low cost.
5. Explore New Markets
Even for established retailers, drop shipping allows them to test new products without having to invest in inventory stock levels. For example a company that specializes in outdoor gear may want to include hiking boots in their product catalog. They can easily make arrangements with a drop shipper to evaluate the demand among their consumers without investing in an inventory of different sizes and colors that might be a big loss if the product idea doesn’t catch on.
With drop shipping, a retailer need only fill the functions of marketing and order processing. Provided that customers are willing to pay a price sufficiently above cost, vendors can continue making profits without ever having to purchase storage space or stockpile products.
When it comes to drop shipping you want to be sure to find the best possible drop-shipping company for your business. A good way to do that is by looking into their reviews. Ideally, you would be able to find quality reviews, such as those at Doba Reviews. It is amazing how much reviews can tell you about a company. That is why it is essential for you to do your research before selecting a company that’s right for you.
Kara Masterson is a freelance writer from West Jordan, Utah. She graduated from the University of Utah and enjoys writing and spending time with her dog, Max.