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3 Keys to Drop Shipping Success

With this inventory management approach, emphasis is on 'management.'

If you’ve read recent articles on The Online Seller about working with dropshipping companies, 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 dropship inventory supply

You might think this unusual, consideration of managing a dropship 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 dropship 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 dropshipping companies 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 dropshipping companies. 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 dropshipping companies

Beyond inventory matters, establishing and nurturing a good working relationship with your dropshipping companies 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 dropship partner:

  • Be sure to get all particulars in writing. Clearly document and agree upon all matters of establishing and maintaining a dropship relationship with a manufacturer or other such supplier. Be certain to specify all details regarding delivery lead times (remember, the drop shipper sends goods directly to your buyer, not to you), shipping costs, warranty and replacement arrangements, and notifications of any changes to inventory availability or inventory cost.
  • Be clear that the supplier is not to include their own flyers, promotion slips or other such literature in shipments to your customers (unless it’s literature that you provide and is to be included in each shipment). Remember, you want the product to be representative of your company or business, and not that of your supplier.
  • Be diligent in providing up-to-date sales forecasts to your drop shippers so they can, in turn, adjust their stocking levels to ensure product will be available to ship when needed. This is that all-important aspect of “partnering” by which you can garner some great returns from a drop shipper that will equally consider your needs when they see how you’re considering theirs.
Remember that the most important player in your business’s supply chain is your customer
  • Carefully define packing and shipping instructions to your drop shippers. Work closely with them to understand how they’ll pack and ship an item to be sure that what they ship—that which will bear your business’s name—will be representative of the reputation you wish to promote. In fact, order product and have it shipped to you so you can experience for yourself what your customers will ultimately experience.
  • Communicate, communicate, communicate. When dealing with dropshipping companies, you’ll likely work with a representative that will service your account, working with you to ensure your orders are shipped as expected. If there are any troubles or potential inventory shortfalls, you’ll want to be communicating regularly with your representative to try to identify and head off such situations before they impact you or your customers—and your business!

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 dropshipped 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 dropshipping companies, doing your work up front to manage the supply chain so the customer will remain none the wiser.

Lastly, a key aspect of dropship 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 dropshipped items, be sure to let them know, especially if the items’ arrival times might vary.

About the author

Dennis L. Prince
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 The Online Seller and/or its principals.

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