Management & Finance

Drop Shipping: Pros and Cons

Drop shipping remains a hot topic among etailers but, even though it has many benefits, it isn’t the best option for every business.

A drop shipper is a product supplier who is willing to ship individual orders. Usually when products are purchased for resale, you have to buy them in bulk quantities, have them shipped to you and then ship them out to your customer. Drop shippers are the exception because they don’t have minimum purchase requirements and will ship the item directly to your customer when you place an order.

For a new business without much operating capital, partnering with a drop-shipping supplier can provide a multitude of products to sell without having to actually inventory those items.

“Using a drop shipping model is an excellent idea if you don’t have a lot of capital to start with,” writes Jeremy Hanks, Nichole Haims and Brandon Williams in Drop Shipping for Dummies. “Because you don’t need to carry any inventory and never make an actual order purchase until you’ve already been paid, drop shipping is a great way to break into the retail business.”

Pros and cons of using drop shipping services

SOME PROS:

  • No need for your business to stock inventory, eliminating a significant cost for your business.
  • Your site can be open for business very quickly.
  • No need for your own warehouse or for filling your garage full of products that you might never sell.
  • Many drop shippers will also sell to the etailer in “light bulk” (units of 500 or less), allowing the etailer to do his own fulfillment.

SOME CONS:

  • When doing research, know there are a lot of scams and poor lists of drop shippers out there, and get one that is regarded as credible.
  • Since you don’t own the inventory, you usually can’t control packaging and can’t include coupons or offers to boost return business.
  • There are different fees from different companies for drop shipping, so do your research. You don’t want shipping costs to be so high that it turns away customers.
  • You won’t get as good a deal on products because you’re ordering one at a time as opposed to buying in bulk.
  • Selling multiple products from multiple suppliers can result in a significant drop-ship fee for the customer.
  • Many suppliers that provide drop-shipping services also provide various ways to integrate their products into your website. There may be fees involved for using certain services from a supplier, so be sure to do thorough research before beginning any partnership.

Joseph Crimi, owner of Sportsmen Express, launched his online store in 2004. He said he did a significant amount of research to locate a partner that could meet his company’s needs.

“I was looking to supplement my income, and I didn’t want to carry inventory and mess with shipping the products,” Crimi said. His site is fully integrated with his supplier, Green Supply, to efficiently process orders and dynamically update his site as Green Supply adds product inventory. That helps ensure sportsmenexpress. com doesn’t create unnecessary work for Crimi.

“If everything is running smoothly, it’s a hands-off process,” he said. Crimi chose Green Supply because he said it was the only drop shipper he found in his niche that used his company’s name on the package being shipped to the customer.

Finding quality drop-ship partners isn’t easy. Chris Malta, product sourcing editor at eBay Radio and author of The Drop Ship Source Directory (available at Worldwidebrands.com advises etailers to avoid the term “drop ship” at popular web-search engines. He said few legitimate drop-shipping companies would appear.

“‘Drop ship’ is a huge keyword and many companies tie themselves to it even if aren’t legitimate,” Malta said.

Malta says the best way to locate a legitimate drop-shipping company is to contact suppliers directly and ask whether they provide that service or purchase a resource like The Drop Ship Source Directory where companies have already been vetted to work with online businesses.

Practical Ecommerce

Practical Ecommerce

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