Dropshipping: The perfect complement to your fulfillment arsenal
Dropshipping is one of the best eCommerce shortcuts. With dropshipping, the retail store doesn’t stock the products they sell; instead the items are shipped directly to the customer from a third party. It’s a lifesaver for small businesses that are just getting started online and don’t yet have the resources to manage their production, inventory, and shipping in-house. But small businesses aren’t the only ones who turn to dropshipping, a convenient shipping system that’s used by more companies than you’d think.
Even large and established companies use dropshipping to complement their regular inventory-based online sales, finding that the benefits outweigh the higher cost of shipping. Here are the main reasons why large companies add dropshipping to their own inventory.
Why turn to dropshipping?
Managing inventory and production can be a major headache. Dropshipping helps reduce overhead costs and ease the fulfillment process in a number of ways.
1. Dropshipping does it for you
With dropshipping, companies don’t have to worry about all the multiple tasks of fulfillment. When you manage your own inventory you’ll need to:
- Own enough warehouse space to house your products
- Pay the salaries of the warehouse floor workers and admin staff
- Negotiate your own shipping deals, deliveries, and logistics
- Handle returns
Logistics is not a simple task and it’s all too easy to let it take over too much of your working time. Dropshipping takes care of these tasks for you so that you can focus on other elements of your business.
2. Dropshipping reduces your costs
Managing your own fulfillment means paying all the costs of warehousing and supply. These can add up to more than you’d think. The cost of renting a suitable unit, salaries for your employees, electricity and climate control, and any necessary equipment all mount up; but with dropshipping these expenses are shared between a number of companies.
On top of that, dropshipping lowers your shipping costs. Dropshipping warehouses can negotiate a lower price for delivery and returns, thanks to their greater volume of goods. They can command a better deal than you’d be able to access.
3. Dropshipping lets you scale easily
With dropshipping, the items you’re selling are all already available; you’re just adding them to your online store. When a product takes off, you have the assurance of knowing that an established and effective production line is already set up and working smoothly. It’s a great way to quickly ramp up your available items from a standing start.
Dropshipping is an ideal solution for companies that want to sell something outside their usual range. Instead of investing in production for an item that is not part of their regular inventory, they can manage it using external fulfillment and increase the range as demand increases.
4. Dropshipping handles seasonal surges
Part of the beauty of dropshipping is that you don’t have to use it all the time. You can manage your own inventory but turn to dropshipping to handle seasonal surges. This way if you get a sudden boost in demand around the holidays, you can smoothly satisfy all your customers without stressing your fulfillment team or having to turn away sales.
5. Dropshipping lets you test out new products
Large companies commonly turn to dropshipping to test-drive new merchandise without investing time and money into validating them or taking the risk of ordering them. The products are tried and tested and readily to hand. All you do is add them to your online store. Because you won’t have tied yourself down to production or import costs, you can offer a huge range of items and wait to see which ones sell the best.
Some extremely popular and successful companies got their start by dropshipping. The popular online shoe store Zappos, for example, started out by dropshipping their products. That’s how they were able to offer such a huge range of shoes, which is what gave them their edge to establish themselves. Now they manage fulfillment themselves, but their success shows how dropshipping can realistically be used to grow a company.
Dropshipping is for large companies, too
These benefits to using dropshipping are true for large corporations as well as for small business and passionate hobbyists. Saving money and hassle on fulfillment, testing out new products, scaling up quickly, and handling seasonal demands are major plus points for everyone. So even if your supply chain is already set, dropshipping can be a useful tool for expansion.