Drop-shipping – where you provide a storefront while a wholesale partner fulfills the orders – is a low-cost way to start a business. But is it right for you?
With a drop-shipping business model, you run an online store. But unlike a typical ecommerce retailer, you never deal with stock or deliveries, and you don’t have to spend any money on inventory.
Instead, you work with a wholesale partner (or partners) who ship the goods directly to your customers. You only pay for the items when they sell, and your markup on the wholesaler’s price provides your profits.
In the last few years, we’ve seen increased connections between global businesses. (Thanks, digital revolution!) Wholesale marketplaces like Alibaba or the smaller, more start-up accessible Aliexpress make it simple to do business with low-cost manufacturers from China, Taiwan, India and beyond. They’re a go-to choice for many drop-ship newbies, though by no means the only option.
You can work with wholesalers just about anywhere, selling just about anything. One option is to sign up to a wholesaler directory like Doba, Worldwide Brands or Salehoo, or you could search Google for wholesalers of the items you’d like to sell.
Drop-shipping sounds like a dream – all the opportunity of starting up a business with far fewer risks. But there are pros and cons to working in this way…
Hurrah for data! There are plenty of digital tools that can ease the burden of keeping up with your wholesaler, sharing stock availability data and even product descriptions automatically with your site. Some of these, such as Inventory Source, do double duty as wholesaler directories. Others, like Spark Shipping, can automatically handle order processing and tracking.
It almost goes without saying, but choosing reputable, reliable wholesalers to work with can make the difference between happy and unhappy customers. Make sure you’ve thoroughly inspected the products and have service level agreements in place for shipping times and methods.
If there’s one defining factor of the modern online consumer, it’s the expectation of free shipping and returns. If you’re going to offer free or subsidized shipping, make sure you factor this into your profit margins, especially if you work with multiple wholesalers.
After all, if the customer selects items from different providers, they won’t impressed to receive two shipping charges from what they perceive as a single source.
Your returns policy also needs to be carefully thought out. Consider if you’re able to offer free returns, and if not, what you’ll do about faulty or damaged items customers may have the right to return. Having a good relationship with your wholesaler is key here.