What is Drop Shipping?
When you open an online store, the main thing you need is inventory.
Without any products to sell, you don’t have a store. This seems pretty obvious.
However, many people are surprised when they start listing products online, as it often takes many more product lines and categories than first anticipated to fill an online store.
So if you don’t have the funds to buy hundreds of different product lines, or simply don’t have the storage space, then drop shipping may provide the answer.
How Does Drop Shipping work?
Basically, you do not purchase products to store in your own warehouse until sold. Instead, you make arrangements with a wholesale supplier to list their products on your website, and when a product is sold, the supplier ships the product. Sounds simple.
The arrangement is straightforward enough, however, there are a few things you should be aware of.
- Firstly, you lose control of the inventory, and this may ultimately cause customer service problems. For example, if there is a delay in shipping, or a product is damaged on arrival.
- Also, since drop shippers usually sell to many retailers, keeping track of their inventory, as well as your own is difficult.
- Profit margins on sales are also lower than if you were to purchase products and sell them directly to your customers.
The benefits of drop shipping are:
- You can add more products to your website, and give your customers greater selection.
- You don’t have to deal with the packing and shipping of products yourself.
- You can begin your retail store without the expense of buying inventory to stock your store, so this can be a good way to get started.
- You can “try out” a new product or new category, just to see if it’s a good fit for your store, without actually buying the product.
In conclusion, drop shipping has many advantages, and some disadvantages. Retailers often find a combination of products housed in their warehouse, and those shipped directly from drop ship suppliers is a good way to go.
Once you have elected to work with a drop shipper, always monitor their performance in regard to product fulfillment and customer service. If you find that a particular supplier does not perform well for you, it is better to stop selling that product, rather than risk your online reputation.
For information about selling through drop ship vendors, and how xocbox systems can help you keep track of shipments and inventory, please contact xocbox.