The pros and cons of running a drop shipping mode for your eCommerce business
When you run an online store, you'll be aware that shipping your goods to your customer is one of your key processes. In this blog, we take a look at what it means to drop-ship your items to your customers, rather than holding stock and shipping yourself.
What is drop shipping?
Drop shipping is an alternative to regular shipping. The way that drop shipping works is, when a customer places an order on your website, instead of sending out the product from your stock room, you let your manufacturers know about the order so that they can send the product directly to the customer. You never actually see or interact with the merchandise that your customers receive.
What are the advantages of drop shipping?
Drop shipping can be a very advantageous business model, but it is just that, a business model. So bear this in mind when planning your business strategy when looking at the advantages below.
- Drop shipping allows you to have larger scalability for your business. If you don't need to invest in storage and warehouses to keep all of your products, you will be able to sell a higher volume of products and will have more to focus on and invest marketing.
- It lowers the cost of online selling for you as a digital retailer as you don't need to pay for storage of stock. It also saves you a lot of the time and focus, usually spent on shipping, that you can use to improve other parts of your business.
- Drop shipping lets you access more markets that may usually be off-limits for your current business. If you don't need to invest in a lot of stock and storage, you can expand your business by offering new products with less risk.
- Using drop shipping makes you less responsible for the entire shipping process. This means if anything goes wrong with the postage, usually, it won't be the fault of you or your business.
- When you use drop shipping, you get access to an almost unlimed inventory. Any orders placed on your eCommerce website goes directly to your manufacturers, where they will send the product to your customers. The manufactures will be able to send your customers a product from their own storage, or they could manufacture a brand new product. This means that you'll almost never run out of stock.
What are the potential disadvantages of drop shipping?
As with any business model, there are also downsides, so here we take a look at some of the disadvantages of drop-shipping.
- One disadvantage to drop shipping is that you're forced to rely on another business for the success of your own. This isn't completely a disadvantage as it also has its benefits, however, using drop shipping means giving up control over the shipping stage of your sales process. If you're not in control, you'll need to have trust that your manufacturers can keep your business standards so that your customers stay happy.
- Using drop shipping can make the buying process a lot less personal from your business point of view. From the viewpoint of the customer, the process doesn't seem too different from other conventional shipping processes.
- If an order requires changes, it will be a much longer process to make them. This is due to the fact that when using drop shipping, you give up control to your manufacturers, and changes to orders will require extra steps in communication as you are not able to simply make the changes yourself.
- The entire shipping process requires extra steps to complete.
How does drop shipping affect your customers?
From a customer point of view, drop shipping doesn't differ much from regular shipping. Customers still receive their goods and will be none the wiser that it didn't come directly from you. Although, if the customer wants to make changes to the order, or if something went wrong, or there was a mistake, it'll be a long process to deal with these problems as the shipping isn't in your control.
How do you implement drop shipping within iPages?
Within iPages, you can work with your suppliers and set up drop shipping by making use of the inventory management, multi-warehouse tools and the purchase ordering functionality. You create your supplier within the Purchase Ordering section and then set up your supplier address as another warehouse for your products. Then, when an order is placed, this is sent to your suppliers' warehouse as well as you. Your supplier can then process this customer order (as a purchase order from you) and you do not handle the inventory at all.
Can we help further?
If you'd like further information about how we can get you started with Drop Shipping, or if you have any other questions, please feel free to get in touch and we'll be more than happy to help.