Tag Archives: drop shipping

Drop Shipping in 2017 – Opportunities and Turbulence for Retailers

Drop shipping in 2017: Is drop shipping the ‘holy grail’ for struggling Bricks Mortar retailers? Or is it a retail business model that goes against what online customers demand: An easy, consistent and seamless experience.

According to Joel Padi writing in The Market Mogal, the young people in the UK choose increasingly to become entrepreneurs. This is because of the unpredictable economy, high study fees and a fiercely competitive job market. Joel says that some of the young entrepreneurs consider drop shipping as a “risk-free, low start-up cost, and profitable business venture”.

Josh Wexler, CEO and Founder of RevCascade, posting in the MULTICHANNELMERCHANT says that “Thanks to its inherent flexibility and low-risk nature, drop shipping has the potential to be your ultimate tool for merchandising and product curation”. However, Ed Kennedy cautions that with drop shipping, a retailer may put his/her good reputation in another’s hands. A real concern…

The drop shipping in 2017 will be discussed – does it offers opportunities for retailers, or is it too troublesome?

The drop shipping distribution model

The drop shipping distribution model is usually contrasted with the traditional retail distribution model. Comparing the two models is not without a good reason. Traditional retail distribution models require the retailer to buy inventory, and to store and manage it. This practice needs a monetary investment that serves as an important entry barrier to the industry.

There is no need for a retailer to buy inventory, or to handle it when using drop shipping.  Since the capital requirements starting a drop ship retail business is small, the barrier to enter the industry is low. Therefore, starting a drop ship business seems easy, but how easy is it to keep it open?

The pros and cons of drop shipping in 2017

Drop shipping, as with any other retail business model, has its advantages and disadvantages:

The advantages of using drop shipping for existing retailers are according to Josh Wexler as follows:

  • Increasing volume with existing brands – launching a drop ship program largely takes the responsibility of shipping and fulfillment off your shoulders;
  • Selling new products from new (and existing) brands – your product mix and brand offerings can be drastically expanded and diversified with virtually no risk;
  • Testing new verticals – drop shipping can mitigate risk to the point where retailers can test out merchandising with entirely new verticals, not just products and brands;

The disadvantages for retailers using a drop shipping system are according to Strategy Plus:

  • Processing your orders can become difficult. The time between selling a product and getting it shipped can take long. Also, there are many conversations and actions that need to take place before it gets sent off;
  • Not having all of the product information is problematic. As you never actually handle the products that you are selling, you have no realistic idea of what they are like;
  • Customer service issues. Drop shipping removes the responsibility of shipping but, sadly, it also removes a large part of the customer experience from your control;
  • A vast amount of competition is everywhere. Finding great drop shipping products means they generally will come with competition from other retailers in your sector.

How should retailers practice drop shipping in 2017

In a time where many Bricks and Mortar retailers are closing shops because changes in the buying behaviour of their customers, a drop shipping distribution model may provide an outcome. Indeed, drop shipping has the power to build a retailer’s eCommerce site and increase product offerings with little capital investment.

However, Peter Zaballos, Chief Marketing Officer at SPS (quoted in the MULTICHANNELMERCHANT) suggests that before retailers decide to add drop shipping capabilities, they should consider the following six questions:

  1. Do I have the infrastructure needed to support it? Drop shipping involves many moving parts and requires flawless orchestration between retailers and suppliers. Communication, collaboration and efficiency are key to meeting the promise made to consumers.
  2. Do I have the right internal resources in place? Managing the increased document flow drop shipping requires may tax your internal teams. It’s critical that you have systems and processes that can support increased volume.
  3. Which of my suppliers have drop shipping capabilities? While having a relationship with a supplier that offers drop shipping makes it easier to add this component to your merchandising strategy, it is not a necessity.
  4. How will I receive reliable, accurate product information? Today’s digital consumers rely on detailed product information when making purchasing decisions. To ensure you provide such information, gather item attributes from your suppliers.
  5. How will I maintain service levels? Drop ship agreements require collaboration and trust in order to ensure customer expectations are met. From the start, foster and encourage open dialogue and set expectations, requirements and goals.
  6. In what way will I manage returns? Even with accurate product information and a good shopping experience, returns are inevitable and must be planned for. First, determine what to do with merchandise that is returned. Will it go back to the warehouse or the supplier, be discounted and sent to store shelves or sold elsewhere?

Concluding

Although the start-up costs are low with a drop shipping business, it’s not so easy to run it. Websites such as Dropship.com and Shopify as well as other applications run by the wholesale suppliers will mostly give entrepreneurs a seamless start. However, what happens there after will require all the ‘guts’ and determination to keep going.

Then there is the ‘the paradox of choice’. Jeremy Hanks, CEO of Dsco said recently in Practical Ecommerce that “customers overwhelmed by product variety end up just window shopping.” Joel Padi writing in The Market Mogal advises that when starting with drop shipping, specialization in a niche market could prove to be the key to a profitable start-up. By reducing their focus, first-time entrepreneurs can narrow the target market, reducing advertising and marketing costs.

Finally, to do successful drop shipping in 2017, the retailer must maintain control over the entire customer experience, including how transactions and communications take place, says Adrien Nussenbaum, co-founder of Mirakl (Internet Retailing).

Image: Pixabay

Read also:  Drop shipping retail in 2016

 

 

Drop Shipping Retail in 2016

The author of this blog has previously reported on hard lessons that he’d learnt when trying to do drop shipping (How-not-to-start-your-online-retail-business). Has anything changed with drop shipping since three years ago?

What is drop shipping?

Just a quick reminder what drop shipping is:

Drop shipping, according to Shopify, is an online retail model where a retailer doesn’t keep the products it sells in stock. Instead, when a retailer sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the retailer never sees or handles the product.

What are the advantages and disadvantages of drop shipping?

Joel Padi, writing in the Market Mogul has recently commented on drop shipping. He mentioned the following advantages and disadvantages:

Advantages:

  • It is easy and cheap to start an online drop ship business – you only need an e-commerce website;
  • No capital is needed to secure a premises and to buy inventory;
  • The costs for the retailer only starts when the customer has paid for her order;
  • The drop ship retailer can operate from anywhere at any time.

Disadvantages:

  • Low margins – because entry is easy and many of the products is from the same manufacturer;
  • Intense competition – thousands of websites offering the same products. Drop ship retailers must invest many dollars and lots of time for prospect customers to buy from them;
  • Lack of quality or brand control – drop ship retailers are totally depended on the drop ship suppliers for quality or brand control;
  • Availability – most of the drop ship retailers purchase their products from a few suppliers. Retailers can occasionally expect to find products are out of stock after an order has already been placed;
  • Shipping issues – the cheapest source of drop ship products is from countries such as China. Typically this results in a month-long wait on deliveries.

Has anything changed with online drop shipping retail the past three years?

To answer my own question – no! The alternative to drop shipping is for retailers to find a niche product to trade online. Customers are looking for niche products online because they have a specific need for them. Retailers may therefore ask a premium price for satisfying those specific needs…

Visit eBizplan for more on online retailing

Image: nchannel.com

How Not To Start Your Online Retail Business…

It seems so easy to start your online retail business. There are however a number of pitfalls as I have discovered recently venturing the unknown.

This is how my disastrous journey to start an online retail business started:

Carefree

I have money than are not working for me…

Having some money laying for months in my “personal” business bank account, I’ve decided it is time to use it to start my online shop. Reading everyday about the success stories of eCommerce entrepreneurs and the usual “rag to riches” case studies, and with money in the pocket, I needed little convincing to jump at this opportunity.

Eagerness

Taking the leap into virtual richness…

Rationale – if you want to start an online shop, you should look online to start your shop. That is just what I’ve done. It was however disconcerting when surfing the web “Starting your online store” resulted in 1.3 billion hits on Google’s result page. Well, if “starting your online shop” generated so many hits on Google’s search result pages, then surely there must be some success stories on the web about people that started their online shop in a similar way that I’d dreamt of…

Justification

The process of opening my first online shop was a lonely one…

When you are on your own, there is no strategic brainstorming sessions or a meaningful debate that usually takes place when an organisation starts a new venture. The internet served therefore as justification for my decisions in the processes of opening my online shop.

Eventually I found out that the internet is not the best source for justifying opening your new online business…

Confirmation

After giving myself the go-ahead to open my online shop, I’ve started with the process…

Which was rather simple – on Google’s the first result page I‘d clicked on an ad: “Osell Makes Your Online Business Dreams Come True! Largest Wholesale Catalog in the World” (sic). After viewing their catalogs and variety of products, and support – I’d never thought it would be so easy getting a drop ship supplier of my online shop.

Eagerly I‘d registered as an “Osell user”…

Communicating with Tracy

Once I’ve registered with Osell, a personal consultant was appointed to me…

Tracy and I had email conversations about what products I want to sell, what type website I needed and that I needed to pay $600 to integrate OSell’s catalog to my website. Tracy inquired every day about the process, urging me to get my website, saying that every day counts and I am losing money the longer I wait…

Then it started to cost me money…

Starting my online retail business

If you want to start a business, there is start-up costs involved, even if you start online retail business…

To do business with OSell my immediate start-up cost was as follows:

• E- commerce website – $1000;

• Skype – $100.

With everything in place, I’d contacted Tracy to unlock my first online shop…

Moving the goalposts

Tracy confirmed that integrating OSell’s catalog into my website will be done without any problems. However, when I’d asked her for OSell’s banking details to pay my $600 for integrating their catalog, she told me that I have to do it on my own or hire local IT professionals to do it for me.

Tracy nonchalantly mentioned that the $600 is actually a subscription fee. I’ve decided to pull the plug right then – because if OSell is starting to move the goalposts it may be the order of the day.

OSell made me feel like a fool…

Website for sale

The juncture with OSell has put my online shop prematurely in the market – any buyer out there? Sorry, no catalogs though…

Image: flickr.com