In today’s ultra-competitive online environment, dropshipping is becoming a popular method of fulfilling orders for many online sellers, without ever having to hold stock. Approximately half of the units sold on Amazon worldwide are from third-party sellers, and 22-33% of Internet retailers have adopted drop shipping as their primary method of order fulfilment. (Source: E-DSS.org)
What is dropshipping and how does it work?
Dropshipping is a type of order fulfillment method where a business doesn’t stock the product it’s selling. Instead of stocking their products themselves, the seller buys the stock they need from a third party and the third party will then fulfill orders for them. The third party is usually a wholesaler or the manufacturer themselves.
What are the benefits of dropshipping?
Dropshipping is a low-risk online business model that guarantees profits because it focuses on order fulfilment. Another reason for its success is that drop shipping can help you make money while you sleep, or at least help in getting you a step closer to that reality! There are many benefits of opting to choose the dropshipping fulfilment method, we’ve explored some of them below.
Greater Flexibility
When a business doesn’t have to worry about having a physical warehouse to keep stock it means that it can operate from wherever they want. Businesses that opt for dropshipping can also change what products they are selling as well as increase or decrease their product offering in line with the changes in the market.
No inventory management
When a third party is taking care of a business's stock it means that they don’t have to. With drop shipping, a business doesn’t have to worry about stock-taking, over or under-purchasing or storage issues.
If you are a business looking for a way to improve your inventory management, at Mintsoft we have inventory management software and warehouse management software that can help take care of everything to do with your inventory so you don’t have to.
Grow and Scale Quicker and Easier
A retailer using dropshipping can often scale and grow quicker than businesses using more traditional fulfilment models as their growth is not dependent on a physical location or staff numbers.
Lower start-up costs
When setting up a retail business a lot of the initial start-up costs are buying stock and creating an inventory of products. When choosing to dropship, you don’t have to spend the money doing this resulting in cheaper start-up costs. The business will also not have to worry about having left over unsold stock as they only pay for what they sell.
Are there any downsides to choosing dropshipping?
Like anything, there are downsides to dropshipping. One of the main downsides is that profits can often be lower due to having to pay a third party to deal with fulfilment costs. As a business never actually stocks the product, they may not know the quality of the product and all the product information which can make it tricky to answer customer questions. Another downside is that businesses have less control over customer experiences as they aren’t directly sending the products out to the customers themselves.
A hybrid approach to dropshipping fulfillment
Many online retailers choose to test the waters, and ‘dabble’ in dropshipping whilst also holding stock. Using a hybrid approach where a percentage of items are dropshipped, and the rest are sold and held on-site (either in premises or with a 3PL) can be an attractive testing measure.
Dropshipping has the illusion of being close to free. While it is a way to run an online business with low capital investment and great returns, it does require some investment.
The first is in people – a great wholesaler is key to the whole operation, and 84% of online sellers find that establishing a drop-ship supplier or wholesaler relationship is the #1 roadblock to starting an online business. (Source: gogo drop ship) You need someone reliable, able to fulfil, and who understands the importance of customer experience. After that, you need the right tech.
The right software is key to a great dropshipping success
Dropshipping with support from the right software can be close to set and forget. Many people run very healthy businesses from a 100% dropshipping model when they are supported by a system that tackles the admin; known as automated dropshipping tools, or dropshipping automation software.
Automated dropshipping tools could help
If you decide to implement a dropshipping model, at the very least, you need an Order Management System (OMS). An OMS will allow you to begin with the right foundations. Managing the dropshipping process can be an administrative nightmare if you start from a manual process.
Let’s start with an example. If you set your new dropshipping venture in motion with a sharp campaign and attracted sales, it wouldn’t be champagne popping time – it would be admin time!
You’d need to remember which products got sent by the various suppliers, then you’d have to create invoices and cut and paste data to send on to the supplier’s order team. After this, the work still wouldn’t be done, as you’d then have to follow up on emails to the suppliers and your customer – it could get very messy, very quickly. And unless you went offline, that volume of work could become relentless. So, what should you look for to remove administration as a dropshipper?
Selling stock and dropshipping? You need visibility of your order streams
There are various OMS solutions, but the key is to find one that offers visibility of all your order streams for a full understanding of what you are selling and what’s been sold, all in one central place. In addition, you need the ability to sell on platforms (perhaps like eBay and Amazon) and get the order details to the company holding the products without having to log into each platform, download forms, print them, and then send emails on.
Doing this for just a few products would take at least 5 – 10 minutes. Multiply that, and your day could vanish on admin alone.
Going for zero stock and 100% dropshipping? Aim for hands off management
If you are looking at a zero stock model, you need a system to send emails to sellers as soon as you get an order, automatically and on your behalf.
This method is as close as possible to a hands-off experience as you can get, and you will be amazed at how well it works. The key to this isn’t just having a great email system or an OMS, but having those in addition to software that has ‘inventory management’ to back it up. A robust and reliable OMS is there to handle the dashboard and overview of your orders, and inventory management capabilities with an open API and automated email function allows it to go straight through to whoever is fulfilling the order.
The API is the most important piece of the puzzle, as this means drop-ship orders can go straight onto the supplier’s systems for integrated dispatch with no manual re-keying or uploading needed by either party. It’s all done safely and securely in the cloud.
Can’t decide?
Get both with Mintsoft! Try out a hybrid model or go 100% dropshipping. Mintsoft offers an all-in-one OMS, great inventory management capabilities, as well as an API and email functionality. Wherever your business goes, we can support it.
How to get started
We know moving into this world can be a strange time, so we make it simple. We can streamline and automate the drop shipping fulfilment process for you. It’s so quick and simple, we can explain it in 3 bullet points.
- First, you create your dropship supplier with their email address, then add or upload all your dropship products.
- As soon as products have been added, your dropship suppliers will automatically be notified when any orders are received from your various sales channels.
- They get all the details they need on the dropship products that they need to fulfil and all the customer, product and address details needed to dispatch the order.
That’s it – you’re now a drop shipper! Stock and logistics worries are gone, and you can now focus on creating marketing and sales campaigns to generate orders. It’s an exciting way to do business with plenty of benefits and if you’re ready to learn more, we’d love to help.
