If you've read recent articles on Auctiva EDU about drop shipping, you're likely curious yet a bit cautious about embracing this sales fulfillment method—and that's good. Drop shipping has become a selected and successful method for many online sellers, but it definitely requires a solid understanding of how to manage the supplier and customer relationships.
Drop shipping entails a different sort of business management approach when it comes to determining the products you'll offer by this method, the suppliers who will provide the products and the experience for the customers, who will ultimately receive them. Here are a few additional points to consider as you continue to ready yourself for drop shipping.
1. Carefully manage your drop-ship inventory supply
You might think this unusual, consideration of managing a drop-ship inventory. True, the essence and appeal of drop shipping is to avoid investing in and warehousing inventory yourself, electing for a manufacturer or distributor to manage that for you.
The truth is, however, that it is necessary to manage aspects of drop-ship inventory to avoid the nightmarish situation when a supplier informs you the items you just sold are now out of stock. Relax-you can manage this unfortunate situation if you take a proactive stance to the matter. Here's how:
Provide up-to-date sales forecasts to your drop shippers so they can, in turn, ensure product will be available to ship when needed
- For the immediate resolution, ensure you keep just a few units of your products on hand for yourself. It's wise to have a reasonable quantity on hand that you, yourself, can ship to customers (you decide how many, based upon your sales volume) just in case there's an unexpected disruption in your source of supply.
- As a proactive measure, always identify backup sources of supply that might be able to fulfill orders, if your primary supplier slips into a stock-out situation.
- With your primary supplier (or any supplier, for that matter), inquire whether you can reserve quantities of a product, to be warehoused at the drop shipper's location. This is a secondary safety net beyond any "safety stock" you might warehouse yourself.
- To avoid being in a reactive mode when supply of an item is disrupted, you should suspend future sales of the item until you're assured inventory is once again plentiful to fulfill customer orders. Otherwise, you truly are selling goods you can't deliver.
- And, as an ongoing inventory management practice, continually re-assess your drop shipper. It's understandable that suppliers can run into supply problems once in a while, but if you're hearing more often than not that your source is unable to maintain a sustained inventory of the goods you're selling, you may want to switch over to another primary source.
2. Actively manage your drop shipper
Beyond inventory matters, establishing and nurturing a good working relationship with a drop shipper is essential if you're to succeed in selling and managing a virtual inventory. To that end, consider these key points in maintaining a happy and reliable relationship with a drop-ship partner:
3. Set customer expectations at the outset
Remember that the most important player in your business's supply chain is your customer. While not really a part of the chain itself, but, rather, the recipient of its function, the customer nevertheless needs to be managed well for your business to flourish.
Although drop shipping might be new to you, chances are your customers have been recipients of drop-shipped goods for decades. (They just didn't know it). Your job, then, is to maintain that same level of transparency by ensuring you're offering reliable goods from reliable drop shippers, doing your work up front to manage the supply chain so the customer will remain none the wiser.
Lastly, a key aspect of drop-ship supply that you should communicate to your customers is that, when multiple goods are purchased, some may be shipped in separate boxes. (These could be coming from multiple fulfillment points, but all should bear your name as the seller). If your customers will be receiving a separate shipment for drop-shipped items, be sure to let them know, especially if the items' arrival times might vary.
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Dennis L. Prince has been analyzing and advocating the e-commerce sector since 1996. He has published more than 12 books on the subject, including How to Sell Anything on eBay…and Make a Fortune, second edition (McGraw-Hill, 2006) and How to Make Money with MySpace (McGraw-Hill, 2008). His insight is actively sought within online, magazine, television and radio venues.
Opinions expressed here may not be shared by Auctiva Corp. and/or its principals.