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What is Drop Shipping?
Drop Shipping requires setting up your eCommerce shop and have some material/product suppliers who can take your orders and fulfill them by shipping the products directly to your customers. And this makes this business model different from default eCommerce fulfillment.
With this business model, you as a retailer never own the inventory which you will be selling to your customers through your eCommerce web store. But actually, you act as a medium between customer and suppliers, who passes the order received on your online store to the suppliers for packing and shipping the order.
Here, you earn the profit from the difference of what you are charging to your customers and what suppliers are charging you for the order fulfillment.
How Does Drop Shipping Works?
Let us understand the process of drop shipping with these simple steps:
1. A customer visits your online Magento based store and buys a product.
2. Once you have received the order, you forward it to your drop shipper (wholesaler, retailer, manufacturer etc.) either manually or automatically.
3. After that, the drop shipper packages the order and ship that to your customer.
Myths Vs Facts:
The Drop Shipping method is quite new as compared to other business models. There may be many people who are not aware of this model. And as they are unfamiliar, they may have some confusions and believe in myths. So to clear their doubts and confusions we are sharing the common myths and their actual facts in this section. Go through it:
| No. | Myths | Facts |
| 1 | It only works for wholesale and low-cost products. | People think that with drop shipping business, the shop sells only low-quality and low-cost products online. But this is not the case.The growing competition has changed the way people run their businesses. Now, they don’t only focus on competitive price but also quality products, services and creating the best shopping experience. |
| 2 | For building the site and managing the inventory, it needs the help a developer. | In this technical era, you don’t need to worry about coding and developing the thing. All the things are being created such that the owners can manage their store’s backend by their own and if they need any help, they can ask for it anytime. |
| 3 | Any supplier will want to sell on a drop shipping service provider site/store. | As you will not deal with any random supplier, same goes with the suppliers. They don’t just say yes for any drop shipping business person.They are also concerned about their brand and products sold on different platforms. |
| 4 | It only requires the launch of the site then the owner can quit the job and there will be no physical work, unlike the physical retail store. | No doubt this business prevents you from much physical work. But this doesn’t mean that you don’t need to do anything.You have to find your niche merchandise, choose the right suppliers and make plans for how to run your business. |
| 5 | It is not easy to make money with drop shipping. | There are many companies which run on drop shipping. Yes, there is a low margin for some of the products but you can sell a large variety of products on your store.It actually saves your money for purchasing the inventory, renting and maintenance of the warehouse. As you don’t need these things with this model. |
| 6 | Drop Shipping is all product sourcing solution. | It is not the solution for all type of businesses.It can be the solution for the people who only go for certain brand products or the products which are in demand.
It is for people who want to save their investment in inventory and warehouses. |
Advantages of Magento Drop Shipping:
There are a number of benefits or advantages which makes it a worth utilize business model for eCommerce businesses.
1. You don’t have to keep and maintain an inventory of the products you will be selling.
2. There will be no extra cost for renting and maintaining a place for storing inventories.
3. With Drop shipping business, you can sell any product you want, to your customers. You can try different types of products on your site.
4. You can select the suppliers or drop shippers in the same place where you wish to sell your products.
5. You can run your business from anywhere. You just need a computer device.
Disadvantages of Magento Drop Shipping:
There are some disadvantages of this model too. But with correct planning, you can avoid those from occurring.
1. It is a crucial step to select the right supplier for your business as your success depends on how your suppliers fulfill your orders.
2. You have to pay shipping costs to all the suppliers if you are dealing with multiple of them.
3. You have to work with multiple suppliers for better services. But, the management or handling of all those suppliers is tough and complicated.
4. If you have not selected the right supplier, then you may lose your customers and brand value.
5. The gross margin is low with drop shipping.
Magento Drop Shipping Solutions:
If you are ready to go with the Drop Shipping business and want to have Drop Shipping in your Magento based store, then there are 3 ways to do it:
1. Manually Drop Ship the Orders: This is the solution for the beginners or fresher in Drop shipping business. When you receive an order, you go to the supplier’s site and place the same order there or send an email requesting for that order. Here you get the option of selecting between the suppliers and it also prevents you from investing a handsome amount in technology or automated systems.
2. Drop Shipping Extensions for Magento: This is for the medium level business. If you have started selling a large number of products per day and now want to automate the whole process then you should go for using Magento extensions for Drop Shipping. While selecting the suitable extensions please make sure that you consider pricing, features, integration, reviews and splitting orders.
3. Drop Shipping for Multiple Channel Platform: If you have grown larger and now you want to sell to multiple platforms, then this method is for you. This channel permits you to run and manage your whole business and process from one place. And you need to fully integrate and automate your system to make sure that orders are transferred to correct channel for the fulfillment.
Common Problems with Drop Shipping:
Until here, you must have made up your mind that the Drop Shipping is the best business model for an eCommerce online store. But wait, there is more to it.
When you go for Drop Shipping business it means that your business is almost run by your suppliers or drop shippers. You have to depend or rely on them for each and every order completion. And the success of all your orders depends on how they have fulfilled the order.
So, let us go through some common problems or issues which a drop shipping business person may face:
Out of Stock Products:
This is the most common situation which you may face after you have received an order from a customer. This problem is faced by many shop owners even though the drop shippers keep them informed about the inventory.
This can be solved or rather avoided to some extent by keeping more than one supplier for products of every type. Don’t just rely upon or depend on a single supplier in this business.
Recommended Extension: Easily inform the customers the products that are out of stock and also notify them when the product is in stock.
Product Information:
With drop shipping, you can get suppliers for different product types. But this also makes difficult to manage and update the product information on the website. For a perfect product information, you should have the following content displayed on the site for every single product:
• Accurate product description
• Clear and quality product images
• Shipping details
• Product cost
• Product availability
All these information gives a complete idea about the product to the customers/visitors.
While searching for suppliers for your business, look for those who can provide and update you with all the above-mentioned products details accurately.
Order Processing:
Mostly the eCommerce store owners work with multiple suppliers and the different suppliers may have the different way of working or order fulfilling. The processing of an order goes through various steps and ideally you should keep your customers informed at every step and this is crucial these days.
What if you don’t hear from your suppliers and is a customer is waiting for the update? This can either make or break the faith of the customer in you.
Work with the suppliers who have an online presence and automated order processing, who work as per the time is given to the customer. And in case there is some issue, they keep you informed about it so that you know how to handle your customer.
Communication:
Communication between your customer-you-supplier is very crucial because any missed communication can affect your business and its brand value.
However, it is your responsibility to ensure that you end to end communicate with both the parties.
Wrong Item/quantity Shipped:
The wrong product or product sent to the customers can be worst thing happened in any eCommerce store. It creates a negative image of you as a business and may affect the sales and conversion rates as well.
On your part, you know that it was not your mistake as it has been done by the suppliers but for the customers, you are the owner of that Magento store and they have purchased from you. You cannot convince them by saying that you were right on your part and it was the supplier who committed the mistake.
This condition happens because of the mistake or negligence. But how can you avoid this or rather handle this?
Before you start your business you should know about the return policy of your suppliers. Also, regarding the wrong quantity, you can find that thing on the invoice and inform as well as stop the shipping stage.
But if the order has already been shipped then you should inform your customer and offer them some discount as a token of apology. And make sure of this in future.
Shipping of products:
With drop shipping business model you cannot offer the free shipping method. The thing is that customers love “free” word whether it is in regards to product, complimentary thing or shipping.
While selecting the shipping methods for your Magento eCommerce Website, you need to be careful about the profit as well gross margin level.
For a low price product, you cannot offer free shipping because you have to pay for the shipping to the suppliers. If you are selling any high-value product then you can offer a free shipping on that.
These were few of the problems which you might face as a drop shipping business. But, the good part is that these issues are not that big or complicated as you can sort them out by taking some measurable steps from your side. And make your drop shipping business a big success.
Dos and Don’ts of Drop Shipping:
With technique or business, there are some dos and do not’s which you should follow to ensure getting better results or growth.
Dos Don’ts:
Offer better services along with high-quality products with affordable price. Start a business by just offering the lowest price in the market.
Decide your niche merchandise Sell the same products or services which are already there in the market in more than required numbers.
Focus on providing the best customer service as well. Depend on a single supplier or drop shipper.
Offer the seasonal products in off-season. Afraid of trying different marketplace or platforms.
Bundle the products which are related to each other. Copy the manufacturers or simple product descriptions on the site.
Research about customer’s shopping behavior and offer those products. Try offering different shipping rates as per the requirement or convenience.
Setting Up the Website for Drop Shipping:
The first thing which you should have for running a Drop Shipping business is, an awesome website, this is the platform which will run your business.
Let us see what a website will do for you:
1. The customers will see and search the products on your website
2. The customers will make an order for a product
3. You will get the online payments
4. You can manage all your orders and products
5. You can send those orders to your suppliers for the fulfillment
6. The suppliers, as well as customers, will communicate with you.
And the most important thing is that you don’t need to hire a developer or a Support for every single thing. You will need a Magento programmer for developing your website and launching it, and rest can be taken care by you. In this Internet era, you will get all the information, data as well as tutorials on the web. And for this, you just need to search for that particular thing on the web with proper keywords. That’s it.
But if you face issue with anything, you can always contact M-Connect Magento team and we will take care of it.
Is a Drop Ship Business Profitable?
For any business, to achieve success or profit depends on various factors. And if you use the drop ship products and business in a correct way it will be easy for you to reach your goal successfully. As we discussed above a myth about opening a website and then just relaxing is not the game plan.
The drop shipping business is not so easy and not even hard too. But, for getting the success you want, you still have to work hard and invest your time. Some of the new sellers in the eCommerce marketplace are a proof that a drop ship model can make you grow your online business and make you earn so much product monthly.
There are some pros and cons associated with both the traditional and drop ship retail. But the biggest advantage of drop ship is that it saves your money on inventory storage as well as a physical store to keep that. It also saves from managing the products which are not getting sold over time.
Final Words:
Yes, the drop shipping business is an easier and faster way to be in the eCommerce marketplace. But you have to invest your time and efforts for an attractive website, marketing strategies and providing the best customer service.
You learned about the myths, advantages, disadvantages as well as the problems of drop shipping business model. But when you have the correct plan and right direction, you can be successful in the market.
How do you find the blog, don’t forget to share your comments? If you want to know more about Drop shipping or any other eCommerce Business Model, you can talk to us.
