The drop ship business has become an on-line phenomenon. Everyone has rushed into it and regarding five% are successful in the endeavors. There are lots of reasons why the success rate is so low, however in this article I’m going to speak about the professional’s and con’s of drop shipping vs inventory.
Over Head
Obviously a drop ship business is going to destroy a business who should stock all there merchandise. The overhead is almost nothing by having everything you sell, sitting during a warehouse that you do not pay for. By utilizing drop ship manufacturers and distributors, you’re solely paying for the products you sell, after you sell them. Where as if you have inventory, you’re paying for the products before you sell them, that positively increases your overhead.
Competitive Pricing
Becoming a dealer for a company that drop ships is comparatively easy. Therefore when it comes to having your product prices competitively, who do you’re thinking that wins the competitive pricing challenge? If you guessed the business who stocks there merchandise, you guessed right. By drop shipping, you are doing get dealer pricing, however so does each different drop ship dealer that competes with you. Also the margins you receive may look low, but compared the the wholesale pricing firms that inventory get, your in the incorrect place. If you actually wish to be competitive, my suggestion is to stock your best sellers and ship them yourself. Go for the wholesale pricing and negotiate for the most effective margins.
Client Service
By owning a corporation that drop ships everything, it’s a plus as a result of you’ll focus it slow to the customer service side. There’s a problem though, drop ship dealers won’t be able to supply a very good job on client service to there customers or clients. An example of this:
“I placed an order for a scooter on your web site, when will it ship?”
“I am not certain sir, I can need to call the manufacturer and see what’s happening”
“So wait, you guys do not actually ship my product?”
“No, everything is drop shipped from the manufacturer straight to you sir.”
“Wow…..”
This was a basic example of a drop ship disadvantage. Not terribly many customers like dealing with a business that doesn’t ship there own products. This will cause a multitude of problems and is however one example of many. Corporations that ship there own merchandise, have a significant advantage when it comes to client service. They can directly take a look at the merchandise, know specifically when it ships, tracking info etc.
Overall, drop ship businesses are easier to start but tougher to grow. Companies that inventory everything they sell have a major advantage in the market they’re in. One example of a corporation that stocks every product they sell is eReplacementParts.com – As a result of eReplacementParts maintains a listing, they’re ready to produce the guides and detailed service their web site provides.
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