Drop Shipping Defined

What is drop shipping? Drop shipping is a type of order fulfillment where a manufacturer/distributor ships a product to a buyer on behalf of the etailer who sells it. Drop shipping has been around for years — even long before the web — and has created huge opportunities for people looking to sell products cost-effectively. It’s a very attractive option for etailers for several reasons. Here they are:

Drop shipping minimizes risk. The etailer doesn’t have to invest up-front in inventory. It’s merely a matter of offering the product for sale. If or when it sells, a profit is made. If it doesn’t sell, all that is lost is the time and space it took to list it. Drop shipping creates greater flexibility, too, since it’s easier to keep up with current trends — nothing to stock means nothing to “get rid of” when tastes and trends change.

Drop shipping lowers costs. New products are less expensive to launch since (1) you don’t have to go looking for them, and (2) the manufacturer/distributor may offer pre-made promotional content to help you promote them — i.e., custom ads or graphics, article content, etc. What’s more, and we already coverevd this, but it bears repeating — you don’t have to stock the new products, so again, there’s nothing to buy up-front. Drop shipping can also lower costs because the manufacturer/distributor may get better shipping rates than you would as a small business. 

Drop shipping offers convenience. It’s hard to imagine anything being convenient when you’re running your own business, but drop shipping is! There’s nothing to pack, no shipping labels to print, and no waiting in line at the post office! That alone makes drop shipping worth it.

Drop shipping provides practicality. With drop shipping there’s no need for a storage facility or a physical retail location —  just an e-store to sell from. Some etailers have both — a physical location and a web location — others prefer to do it entirely online, from their kitchen table. However you do it, drop shipping allows you to “carry” a wider variety of products than you could if you have to buy and store it all. It also allows you to carry products that may be impractical otherwise — i.e., over-sized products, perishables, ultra-expensive, etc.

Drop shipping can be invisible. Many manufacturers/distributors will ship product to your customers under YOUR NAME and address. Your customers never need to know their order is coming from anyone, or anywhere, but you. They’ll never need to know you’re fulfilling their order from your kitchen table, in your underwear! (And they may prefer it that way.)

Those are all upsides to drop shipping, but still it may not be for everyone. As with anything else, there are some downsides to it. Most importantly is the fact that drop shipping is very competitive. Keep in mind you’re not the only one out there looking for drop-ship products to sell. An entire industry has been built around it. Simply search the words “drop shipping” on Google and you’ll easily get a bazillion results; mainly companies offering you lists, or access to directories, of hundreds of manufacturers and distributors who drop ship. Be warned, not all of these companies are on the up-and-up. Do your research. If you find a particular product or product line you wish to sell, search it on Google, search it on eBay. See how many others are selling the same products, and for how much — you may be surprised. There’s always someone selling it — that’s the nature of the business. But sometimes, it’s downright overkill. Don’t fret, the competition may not matter when marketing to your specific, niche market, or an established base of customers. 

My suggestion to anyone looking to get involved with drop shipping is to look beyond the lists — go beyond the drop shipping directories to find your own product sources. Here three ideas that come to mind:

  • If you already run a physical, retail shop, ask your current distributors if dropshipping is something they’ll do for you. You could, in effect, “carry” and sell more of their product that way.
  • Approach some local artisans to see if they’d be interested in drop shipping their products to your customers.Struggling artisans and crafters are always looking for ways to sell their product and make money.
  • Swing a deal with a local retailer who carries a unique line of products not seen on the web — you sell it online, they ship it, and you split the profits.

If you find you have no choice but to “follow the lemmings” and sell the same drop ship products everyone else is selling, you can still do very well amid the competition. The rule of thumb here is: don’t sell it where everyone else is selling it. If there are 30,000 listings on eBay for your product, don’t waste your money on a listing. Instead post a free ad on Craigslist or Backpage. Better yet, try some offline promotion — run an ad in the local Pennysaver — i.e., “Designer handbags for less. Louis Vitton for $10! www.yourdomain.com.” — or print out business cards or flyers advertising your e-store and pass them out everywhere. Online you can market on Facebook or Twitter, maybe join some groups, forums, etc. — find lists of people to market to directly. Bottom line, you can set yourself apart from the pack by marketing directly to consumers, rather than posting ads to places like eBay and waiting for them to come to you. Get yourself out there, but not where everyone else is, and you should find all the business you need.

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Phil Autelitano is renowned internet advertising and marketing expert, and CEO of etailogic (http://www.etailogic.com), an ecommerce solutions provider specializing in custom-built, turnkey e-stores for the retail trade. He can be reached at [email protected].

Source: http://www.articlesbase.com/ecommerce-articles/drop-shipping-defined-5103835.html

Louis Vuitton.
Image by George M. Groutas via Flickr

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