ShipHero Guide to Drop Shipping
What is Drop Shipping?
Drop shipping is a method where an online seller sells goods they never actually own. In addition, inventory and fulfillment are managed by the drop shipper (vendor), eliminating your need to manage any part of that process. Profit is typically the difference between what you charge your customers, and what the drop shipper charges to fulfill orders.
Recommended Read: What is Drop Shipping 101 by A Better Lemonade Stand
Typical Approach to the Drop Shipping Process
- You receive orders from customers.
- Orders are sent to your vendors who will be acting as your drop shipper.
- Your drop shipper will fulfill the orders received, and ship them directly to your customer.
When to use Drop Shipping
There are many benefits gained from using drop shippers. These include:
- No Need for Storage: You're not storing inventory in your warehouse or distribution center.
- Cheaper Upfront Costs: If you don't need to purchase, ship and store inventory, you can reduce your upfront costs, spreading the cost over orders shipped.
- Fewer People: You don't need to directly fulfill orders if they are being fulfilled by your drop shipper.
- More Choice for Your Customers: You can expand your available products to your customers, giving them more choice.
- Increased Market Reach: In certain circumstances, you may be able to reach new market segments and geographic locations based on your drop shippers offerings.
- Cheaper Shipping: Drop shippers that ship large quantities of shipments, may have better shipping rates, saving you money to fulfill and ship orders.
Avoid these Drop Shipping Mistakes
- Dependability: It goes without saying, that once you make a commitment to your customer to ship a product they have purchased, you need to make sure your drop shipper will fulfill that order in a prompt and reliable manner. Check what other customers your drop shipper serves, as well as how much volume they can handle.
- Bad Customer Experience: You are relying on someone else to fulfill your orders, so be sure you understand how the packages look when received by your customers. See what options are provided to customize your packages.
- Pricier Shipping: Make sure your drop shipper can ship to your customer locations. Verify the shipping carriers and methods they use to understand cost and quality of service.
- Hidden Costs: Check the fees charged by your drop shipper, and make sure you understand the costs associated when drop shipping.
- Confused Customer Support: You will need to make sure drop shipments are tracked and accounted for. This is something that ShipHero helps you do with drop ship management. Customers will be reaching out to you if a product they ordered is late.
- Bad Returns Process: Make sure you clearly understand the policy for returns and lost orders.