Dropshipping has emerged as a highly desirable shipping model for small online businesses. This shipping method effectively transfers the logistics of package delivery from an e-business to a third-party supplier. The dropshipping model can be highly successful if implemented correctly, and in order to do this, businesses must keep the following in mind:
Selecting the Right Suppliers is Necessary for Success
Choosing the right dropshipping suppliers is essential to making an eCommerce business a success. There are many companies that promote themselves as dropshippers but not all are legitimate. Aliexpress is a popular dropshipper but popularity doesn’t necessarily translate into a great service. For example, some packages sent through Aliexpress can be very difficult to track, especially if they are shipped via China Post. Aliexpress also takes 2 to 7 business days to shop a regular package, while there are other great services that only take between 2 to 4 days. You may want to consider whether the supplier is aware that an order is for dropshipping, if not, the supplier may include promotional material in the shipment that has nothing to do with your business. Choose a dropshipper who can ensure that the suppliers are trustworthy, and has proper inventory management.
Pick a Unique Niche
For dropshipping to be profitable, a business must move high volumes of orders. It should remain competitive and drive conversions online. The competition for customer attention is extremely tough on the web. It’s difficult for smaller businesses to directly compete with major e-retailers like Amazon, so how can a small e-business attract high numbers of orders online? Create a unique brand, or more specifically, find a niche market. Offer customers something they can’t find as easily anywhere else, such as a luxurious brand name, affordable prices, or highly selective products. Focus on this niche to truly drive conversions to make the dropshipping model a success.
Choose the Products Wisely
Businesses can ship just about anything via dropshipping, but that doesn’t mean companies should offer customers a wide range of products. It’s very important to consider item size and weight. While businesses can find suppliers for heavy items like furniture, shipping prices can be quite high. There are many logistical obstacles to consider when shipping large and heavy items. That typically translates into higher prices. To actually turn a profit by dropshipping, offer customers lighter items that are easy to ship. Dropshipping may not translate into a viable shipping model for a company when products require special care when shipping. The business may be forced to raise prices of the products on offer, which would undercut a competitive advantage. Brands that are just starting out should steer clear of heavy, fragile, or special-handling products when adopting a dropshipping model. Always consider how the dropshipping costs would reflect the retail price of the item.
Don’t Ignore Marketing Costs
The rise of dropshipping, which eliminates most overhead costs for small businesses, has resulted in severe price competition online. Most e-retailers undercut the prices offered by the competition to attract customers. When developing such price models, it’s important for brands to consider the costs of not just shipping, but marketing as well. Dropshipping may reduce a company’s shipping costs, but it won’t eliminate the marketing costs. Doing business online requires spending a lot of money on a strategic digital marketing campaign. The costs of which should be reflected in the prices in addition to shipping charges. When marketing is calculated, a $5 product purchased from a supplier may cost $20 on the website. Brands must consider tertiary expenses that go with promotional activities when setting competitive prices. Selecting the right dropshipper, thus, would depend on the ultimate retail price put up on the website.
Avoid Negative Reviews with Shipping Insurance
One of the main concerns of dropshipping is, what happens when packages get lost in the mail? Who would bear the costs – the supplier or the brand? When choosing a dropshipper, it’s important to factor in shipping insurance for packages. There must be an understanding between the supplier and the brand as to which party should bear the cost of inevitable shipping mistakes, however, the customer-side fallout would have to be borne by the seller. As negative reviews can ruin an online business, consider paying the additional fee for shipping insurance, especially for valuable items. The cost may be cumbersome, but it would keep the customer feedback positive and allow customers to trust an online brand more. The dropshipping model doesn’t work for small businesses by itself. Retailers must take all of the above factors into consideration when adopting this model. As with any type of shipping and e-retail, problems can occur. Anticipating such problems in advance could save a brand’s reputation and damage repair costs.