05 Jun 2020

What is drop shipping?

Dropshipping allows customers to purchase stock from a retailer sent directly to them from the supplier. The products are only purchased by a retailer as and when they are ordered by their customers. There are many benefits to selling some of your stock in this way from reduced stock holding and improvements to cash flow to fast and efficient delivery and reduced risk in trialling new products. There’s the option to have the sold products delivered to your shop for customer collection too.

While it can be a powerful business tool, there are some drawbacks too. Here, we’ll explain the benefits of drop shipping and things to be mindful of including next day delivery, high-value products, profit margins, stock control, dropshipping and coronavirus, and a list of Bira Direct suppliers that are offering drop shipping.

What are the benefits?

 Drop shipping has certainly got some major benefits, especially for smaller, independent retailers. If you’ve never explored the option, with the increased pressure on retail business as we transition out of COVID lockdown, now could be a good time to seek more information. So, what are the benefits of drop shipping?

  1. No need to consider storage

One of the key advantages to managing your product sales is the space-saving benefit. This method of distribution means a retailer doesn’t have to consider how and where to store stock as they don’t have to handle the product directly. Especially handy for those with small stockrooms or floor/shelf space on the shop floor.

  1. Offer a larger range of products

Sellers can offer their customers a larger range of products and even trial new categories that may be too risky to purchase upfront. This means you can be more creative with your offering, playing around with testing more diverse ranges that could help expand your customer base.

  1. Next day delivery

You may find that many suppliers can offer next day delivery to a destination of the customers choice. Fast delivery should be a priority for independent retailers selling online as this is the key unique selling point (USP) of competitors. Through drop shipping, you can offer this benefit without the additional costs. It is specifically ideal for businesses selling gifts for birthdays, anniversaries and seasonal holidays. There’s also the option of having the stock delivered to your store for your customers to pick up. Not only does this give you and your customers the flexibility to suit all circumstances, but in-store pick up will also increase your opportunity for add-on spending and up-selling.

  1. Pay-as-you-sell

Paying only for the stock you sell makes this fulfilment method perfect for keeping costs down while maximising sales. Stock management versus cash flow can be a tricky balance to get right for an independent retail business, so selling some of your stock via drop shipping can help ease this burden.

  1. Protection for high-maintenance products

This method is great for selling stock that can come with additional costs for delivery like large or high-value products or for products that are delicate and can be damaged in transit. As the suppliers are sending the stock, it’s their responsibility to ensure it’s successfully delivered.

Are there any drawbacks?

 Drop shipping isn’t the perfect, get-rich-fast solution it is sometimes made out to be. There are some things you may need to consider before making any decisions.

  1. Lower margins

With ease comes slightly less reward as most suppliers will have higher costs for this ghost-selling method. With this in mind, you may find that drop shipping is most advantageous when only using it to sell a selection of your product offering. 

  1. Less control

As the stock is going directly from the supplier, customer service issues like processing orders and delivery issues are not in your hands. You’ll need to liaise with the supplier to get any issues your customers might have rectified. This back and forth, could mean that from a retailers perspective your response times are longer. Overcome this by keeping good working relationships with your suppliers and touching base regularly.

  1. Returned products

Drop shipping can make processing customer returns more of a challenge. When your customer asks to return a product they’ve purchased from you, you’re no doubt looking to keep the exchange as positive as possible. You may even look to turn it into an opportunity to impress them with your excellent customer service. However, if they’ve purchased via drop shipping they’ll have to post the product back directly to the supplier and wait for a refund which isn’t always ideal. With this in mind, some retailers choose to accept the refunded product in-store and either return the product to the supplier themselves or sell it on without returning it to the supplier at all. This means you’ll be able to keep 100% control over the exchange with the retailer.

Drop shipping and coronavirus

With daily cases of coronavirus, reducing outlay for the stock could be the difference between surviving and thriving in the ‘new normal’ for retail. But it’s not only about the financial efficiency, drop shipping also means your customers will have more choice when ordering from you online. With new habits formed for online shopping since coronavirus, online sales are expected to remain high. So if you’re not currently selling online, get set up today with three months free.

Suppliers that offer this model  

We encourage suppliers within Bira direct to offer drop shipping to retailers and are pleased to say the following are currently offering this option:

Using Bira Direct suppliers for drop shipping and ordering stock comes with additional benefits, click below to find out more.

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