Ecommerce has already been steadily on the rise over the past decade, but the global pandemic made online shopping even more commonplace for many. It makes sense why many entrepreneurs are eager to cut off their own slice of the pie, so to speak. While there are a few ways to get going in ecommerce, drop shipping is a particularly attractive options for newcomers.
Here’s more on what drop shipping involves and what you need to know to start a business using this model.
What Does Drop Shipping Involve?
Drop shipping is a fulfillment model in which the retailer sells products without storing them. In other words, the ecommerce store that markets the product and facilitates the purchase does not handle the products. Instead, the retailer places an order and provides the delivery information to the wholesaler or manufacturer, which then ships out the item directly to the customer.
According to projections from Global Industry Analysts, the worldwide drop shipping market will surpass $476 billion by 2026. As of 2020, drop shipping was already earning more than $128.5 billion. What makes this fulfillment method increasingly appealing to merchants?
Perhaps the most obvious advantage of drop shipping for retailers is the ability to make sales without having to buy and store a bunch of inventory — something that can lead to high overhead costs and high levels of risk in the event the items don’t sell as well as predicted. Drop shipping provides a more efficient, hands-free model for merchants, as they are able to place orders with wholesalers and manufacturers as customers place orders from their store, eliminating the need to stock up on inventory head of time based on demand forecasting.
As Chron points out, another potential advantage for store owners is the saved time and effort on packing and shipping. Collectively, the time and expense you can save using drop shipping can allow you to focus on other areas of business, like creating great marketing for your drop ship business.
Maximizing Drop Shipping Success
Drop shipping sounds great on paper, and it’s true that this model can help entrepreneurs get up and running in ecommerce without requiring a huge initial investment. However, as with any business model, there are risks and challenges of which to be aware.
Even if a product arrives to a customer via drop shipping, it will typically have the retailer’s brand on it. This means the quality of the product and the condition it arrives in reflect directly on your company — despite the fact you have little control over how the wholesaler treats it.
As one expert notes for Vox, some sellers make the mistake of selling products without verifying “the authenticity and quality.” This can lead to unpleasant surprises if customers have issues with products when they arrive. There are many drop shipping companies in existence today, many located internationally, but this does not automatically mean all wholesalers and manufacturers uphold the same standard of business.
The solution? Always vet suppliers carefully, looking for qualities such as:
- Clear, speedy communication
- High ratings
- Scalability of production
Another important consideration is what your store sells via drop ship. You’ll want to choose something that’s feasible to ship — in terms of weight and price — as well as something that will generate a reasonable profit margin for your business.
Drop shipping can be an efficient way to enter the ecommerce business. Many entrepreneurs are able to start selling faster than if they had to invest in an inventory of products and figure out how to store and ship them. Just remember to prioritize the customer experience as you’re making decisions about which suppliers to use and which products to sell.