What is drop shipping? The dropshipping business can be a quite simple and efficient way to become involved with e-commerce. Many recognized online retailers are now turning into drop shipping companies as a way of decreasing actual inventory on hand, diminishing overall shipping costs and also cutting down on delivery times to clients. Drop shipping allows e-commerce website owners to send single or low quantity unit orders made on their websites to manufacturers or wholesale warehouse companies, who in turn ship the items directly to the customers of these online sellers or retailers. Basically, you do the advertising and collect the payment, while your manufacturer or supplier does and looks after order fulfillment.
There are other benefits of the drop shipping model. As a dropship business can purchase in huge volumes, they will also be able to provide you the best prices on merchandise and shipping, generally wholesale, which will return a larger profit to you. There's no capital investment and no threat if you unexpectedly have a heap of obsolete or outdated items in your stock since you can just take out the listing from your online store. Drop shipping allows you great flexibility with regards to product scope, you can market a dozen items or market a thousand! This becomes an advantage since instead of fretting about delivery and inventory, you focus and pay attention to the current market and find the products your customers need, then be able to quickly add them to your website.
There are challenges and also dangers to dropshipping. Many wholesale businesses may have an interest in teaming up with you using a drop shipping as a business model as it is an easy means for them in generating extra revenue or income, but there is a myriad of points to consider and also things to look out for.
- Pricing points. Do not accept or immediately partner with the first drop shipper you come across with who will give you this very best deal. Have a list of wholesale companies and compare prices then you can partner and make purchases from the most suitable wholesaler company.
- Dropship fees and other charges. Some drop shippers may have a handling fee over and also a high shipping or freight or costs. It is important to know all the expenses involved so that you can calculate your profit margins accurately.
- Any wholesale company that charges a regular participation fee or membership fee must be avoided. The only payment a dropship company charges you is in connection with a specific purchase you make from them.
- Shipping. Is this drop shipper using Clumsy Cal's Discount Express or FedEx? Will the company ship internationally? You want to be assured that their shipping methods will see to it that your customers get their products in one piece and on time. In addition, bear in mind that you might need a specific type of shopping cart in purchase to handle drop shipping. Many shopping carts only allow for one ship from a certain zip code in this configuration for freight calculations.
- Ask the drop shipping company about their return policy, what type of support they will offer you for their merchandise and about any security associated with their merchandise. Get it in writing.
Chargebacks may also be an ominous problem, especially when dealing with high cost, low margin goods as you will have little or no reply from your provider in many instances. Chargebacks are a fatal blow for drop shipping. A chargeback is where a consumer has filed a claim with their bank against a business regarding a transaction for numerous reasons like a claim the goods weren't received, unauthorized transactions or any other of grievances.