Low-investment and profitable business
Being a retailer for a wholesale company on a drop-shipping setup is a low-capital business model for small entrepreneurs. Often what is needed are average online marketing skills and time in one’s hands to run the businesses.
Social media easily connect drop shippers to consumers
The adoption of social media by just about every human being in the world has also opened doors for businessmen with little or no marketing budget. The good news is, wholesalers are usually very bad at online marketing or marketing in general. You have the following likely advantages in finding customers over wholesalers:
• You speak the language of your potential buyers
• You have the time to learn or improve on online marketing
• You are not stuck with the product quality (i.e. you can switch product and deal with another wholesaler or manufacturer)
Besides the above, you are likely to have a better social media presence than a typical wholesaler – which is to say, you probably have a personality and know the kinds of people who will buy the products you are selling.
What to sell?
You may have already decided on a market and the perfect product to sell. But which wholesaler or dropship company will be your lucky supplier. This is a question you will ask yourself constantly. You may find changing a supplier to be a freeing experience, but, ultimately, you will judge a supplier based on success on your end.
The cost of the order fulfillment process
Now that we’ve given a brief overview of drop shipping, we have come to the main topic of this post: parts of order fulfillment will cost you time and money. Yes, even if you are an online marketing genius and get lots of qualified buyers to click to your product page, you still need to make sure orders are taken and buyers pay.
1. Customer service – selling on eBay or owning your own website will influence the way you deal with customers and the inherent cost of customer service. Can you control bad reviews? Do you worry that you will get penalized for non-delivery?
2. Taking orders – Let’s assume your online sales are not automated. Obviously, you’ll need someone to take orders. It can be over the phone or electronically. Less obvious is the fact that you may also need to allocate a lot of time on making sure the supplier processes the orders from your customer.
3. Accounting – money will come your way and some of it will leave your hands and end up with the supplier. At the start, you will do the accounting but as business grows, you may decide to hire someone to do this
4. Product return – if you offer return on order (and you most likely will), you’ll need to set up an arrangement that will reduce your risk and maximize profitability. Are you able to physically check order returns?
Outsourcing fulfillment gives you a head start
You can be an online retailer with very little capital. Customer service can wait until you are a bona fide success, right? However, some may find it smarter to invest in customer service before sales begin to ramp up. There is a good reason for this. For online retailers that mean businesses, customer service will be part of the initial cost, along with the marketing budget. In fact, Magellan has received numerous enquiries from dropship business requiring order takers and customer service. The cost savings are big enough to allow enough preparation time to accommodate the projected sales and room for optimism.
To learn about how we reduce customer service and ordertaking cost of dropship retailers and online retailers in general, send us a message.