Drop-shipping is part of a low-barrier business model in which online retailers act as sales channels for suppliers. The vendors, which are e-commerce stores, don’t actually have the inventory onsite but rather sell on a suppliers behalf. The only difference between this and traditional retailers adopting this model is in who holds the inventory. Here, the supplier acts as a centralized distributor fulfilling orders placed by their retail partners direct-to-consumers. In sum, fulfillment is completed by the supplier on the retailers behalf.
Once a customer places an order, the ecommerce store will place its own order with the supplier. The supplier then ships the product directly to the customer and fulfills the order. The end consumer has a relationship only with the store it purchased from.
Small- and medium-sized businesses (SMBs) benefit from letting suppliers who provide this “direct fulfillment” service by lowering inventory warehousing and space requirements (and associated cost). While it lets vendors increase sales volume, it also lets tech-savvy entrepreneurs develop an easily maintainable venture.
Some Suppliers Help Drop-Shippers Sell Without Holding Inventory
There are essentially three ways to become a drop-shipper. The first entails finding and setting up relationships with suppliers. A vendor agreement is drafted, and both parties win; the supplier moves more product, and the drop-shipper makes a profit.
The second option involves finding retailers with drastically low prices or long-term sales. Not only does this require a lot of research time, but the drop-shipper might be required to buy merchandise at full price if the retailer’s sale ends abruptly. So, not only is this strategy risky, but both customers and suppliers might feel cheated by the drop-shipper, who could be perceived as a middleman con-artist.
The third option is to find a company that offers “private-label shipping.” In this system, a company that connects suppliers with drop-shippers sells the shipper a subscription to the rights to sell the products.
Many times, these companies are not the suppliers, but they connect productive drop-shippers with businesses that want to expand their online market reach. This option might be smart for partners who have a background in e-commerce, Internet marketing and website development.
With private-label shipping, the drop-shipper can but its business logo and return label on the package. Sometimes, drop-shippers that use this strategy can customize their invoices and keep track of their orders online.
How Drop-Shippers Find Suppliers
When looking for a direct fulfillment partner to pick-pack-and ship your sales, the internet is the place to start. Helpful online tools include supplier directories and websites that offer private-label shipping subscriptions.
If companies that need drop-shippers were good at search engine optimization, then they wouldn’t need a drop-shipper. So, when searching for a company in need, it’s a smart idea to browse through as many as 20 pages of search results before changing queries.
When searching for a supplier, ecommerce managers should use plenty of different modifier terms, such as “distributor,” “bulk,” “reseller,” “supplier” and “warehouse.” Not all suppliers use the same keywords on their websites, so a supplier that is not listed for one search term might show up for another.
Finally, a good fulfillment partner knows not to judge a book by its cover. Although a supplier’s website might look as rough and outdated as something from 1995, this very fact can mean plenty of opportunity.
Often, small suppliers with little capital or Internet knowhow will happily accept a partnership with an e-store business who has the experience to market their goods. The supplier can enter the global marketplace, and the shipper can make a profit in a highly efficient business.