June 17, 2014

E-Commerce & Dropshipping: 3 Steps to Success

Posted by Janeesa Hollingshead Category IconInternational Category IconShipping & Logistics

For their past shipping needs, e-tailers went through significant barriers to enter the marketplace. Not only did they need to set up a website, payment solution, and marketing plan (among hundreds of other tasks), but they also had to invest a significant amount of capital in purchasing and storing inventory. The costs and burden associated with acquiring and managing inventory were discouraging to say the least – that is, until drop shipping arrived on the e-commerce scene.

Dropshipping allows retailers to completely bypass the entire inventory management process by shipping directly from manufacturers to consumers. Online retailers never touch the actual product, which leaves them with much more time to focus on other business-building activities; in fact, drop shipping has become a major scaling strategy for many online retailers. The American Society of Business and Behavioral Sciences has found that up to  33% of Internet retailers currently utilize drop shipping as their primary method of order fulfillment.

Drop shipping allow e-Commerce retailer to focus more on the business and let product supplier handle the shipping.
Image from E-DSS.org

And it’s not just small retailers who take advantage of drop shipping’s convenience — Jeremy Hanks, founder of drop shipping platform Doba, stated the following in an interview with Andrew Warner: “It’s definitely a part of an overall strategy for e-commerce. It’s used by the largest companies: Amazon, Costco… it’s a significant strategy that everybody uses.” Strong numbers back up Hanks’ assertion: in 2012, Amazon sold  34% (or $14.2 billion) of its products through drop shipping.So how can you use drop shipping to benefit your online business? Here are a few tips to get started:

Do Your Research

There are many drop shippers available, but like any other industry, it’s imperative to do your research in order to avoid falling victim to a scam or unethical business practices. You may have heard of lists of drop shippers available for retailer purchase in lieu of seeking out individual partners, but it’s not advisable to purchase lists for two reasons. First and foremost, many of the lists available for sale are full of outdated information. They’re simply a waste of time and money. Second, the valid names on the list have been purchased and used by retailers over and over in the past, which means you’ll be entering a crowded marketplace as yet another seller of their products.The best method to find and develop a solid drop shipping relationship is to:

  1. Determine what types of products you’d like to sell.
  2. Research a variety of brands and note the manufacturers’ information for the ones you’d like to carry.
  3. Contact each manufacturer individually to inquire about whether or not they are open to drop shipping their products.
  4. If the manufacturing company does not offer drop shipping, ask which distributor they would recommend using.

Get Permission

If you operate through a distributor, always be sure to ask for reseller agreements between the manufacturer and distributor. A reseller agreement legally allows a drop shipper and their retailers to sell trademarked items; without the agreement, both drop shippers and retailers can be held liable for damages stemming from trademark infringement. Cover yourself and eliminate any possibility of legal trouble by ascertaining your drop shipper’s status with the manufacturer.

Offer Complementary Product Lines

How can you most efficiently increase your sales? By offering complementary product lines through one or more drop shippers! For example, if your e-commerce website offers a variety of books, try to find items like book covers, bookmarks, and reading lights to offer as cross-sells. Many consumers will make a last minute purchase if they are presented with an option that enhances their primary purchase. Case in point: a recent study by Predictive Intent showed that cross-selling can increase sales by 3% when items are shown on the checkout page.

Want to learn more about shipping? Check out our free ebook, “Tips for International Shipping,” today!