Is the Drop Shipping Business Model Right For You?

If you are an internet seller and want to expand your products without additional inventory spending, then you really need to check the dropshipping business model to achieve this. The shipping business model is one in which an entity (usually a manufacturer or wholesaler) decides to allow retailers to order only one item at a time, and further allows retailers to specify a delivery address for each order. In words, this means you can supply the entire product line from one or more manufacturers/wholesalers without having to invest a dime in additional inventory. As a result, you can now offer more products instead of just a few “best-selling” products. Whether a product sells really well or only sells occasionally is no longer important, because it is now just slow costs for your online store for you. There are no storage costs as with storing items.

Let’s take a look at what a dropshipping business model is and how it works.

The easiest way to consider a direct selling business model is to consider your own web-based retail or mail order business. In many ways they work the same way. Orders that receive payment are processed and then shipped to the buyer. In your retail environment and direct shipping environment, the person who receives the package is your customer. The only difference with customers is that in one case the product is shipped directly from your location and in another case the product is shipped from another location.

The following is how the conveying process works mechanically.

You build relationships with shipping companies and integrate their products into your product catalog.
You receive an order from a customer.
Then log into your account with the shipping company and place an order with them. Enter your customer’s address as the shipping address for the item.
The forwarding company then packs and ships the items and updates their ordering system to show when the package has been delivered.
This is really the whole process. The total time investment of your collaboration with the shipping company is the time it takes to enter the order into their order processing system. You are not involved in packaging or transportation.

Elements of a Good Dropshipping Plan

Transport companies vary widely in the products they deliver and the way they run their businesses. Things you will want to find in a transportation company include:

You want to find a company that is always in stock. For your customers, there’s nothing more frustrating than ordering something and being told it’s been back for three weeks. If the shipping company does not always keep current stock of all its products, make sure they have a real time updated stock list and your stock can be integrated with this stock list to highlight the correct status items for each product.
You want a company that delivers quickly. You don’t want your customers to wait forever for their goods, so make sure the forwarding company ships all orders quickly. That’s why you want to ship the order to them quickly so that you don’t cause additional shipping delays because you spend a few days informing them about the order.
You want to be sure that the forwarding company guarantees delivery of the order. If a customer contacts you to report that an order has never been delivered, you want to make sure that a new order is shipped to you or the customer for free. The transport company may ask you to pay insurance premiums for this guarantee, or not. In either case, make sure you keep their 100% delivery guarantee promise.
You want to make sure that the company offers an easy-to-use system for placing orders and status verification. You must be able to place an order online and confirm the delivery time.
You want to make sure that the company does not include any of their own literature/catalogues in the order and that they do not maintain a mailing list for your customers. You work hard for your customers and you need to capitalize on the costs of acquiring these customers.
You want to make sure that you can make a profit with the pricing structure. Many transportation companies will offer you discounts almost as good as their wholesale prices, and some will even match their premium wholesale prices.
So, is the direct shipping business model the right way to grow your business?

There are many factors to check when determining whether a direct selling business model is right for your retail business. Many of these have been discussed in the bullet points above, but there are two other factors that need to be checked when making this decision.

Is this degree of separation between you and your client?

Work for you? When you ship goods in this way, you need to pay for the freight, and in some cases, you need to pay for the delivery fee for each item/order. What you need to investigate is whether the profit structure is sufficient to meet your needs once you subtract the total cost of the order (including payments to the company and any fees (such as credit card processing fees)). You should also keep in mind that if you ship products from multiple companies, you will have to pay multiple companies for shipping if the products ordered by customers must be shipped to multiple places. This will also affect your profit per order.
By checking all the above elements, you can decide whether the direct sales business model is suitable for your retail business. As long as you take the time to find a reputable company and work with it, this is a great way to expand your product catalog and profit without you having any risk. If you are considering expanding your business this year, please seriously consider this model, and then invest thousands of inventory, in case of emergency, wait for it to move.


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