For the experienced Shopping Retailer with inventory management, warehousing /storage and delivery facilities there are obvious benefits of expanding their business online and signing up with drop ship suppliers or agencies that handle multiple suppliers. Generally this will be under term agreements and legally binding contracts to protect the vendor and the retailer.
Let’s come back to the idea of working from home and you are ready to start your home based business by selling products online, or you already have a small retail business and have decided that you want to expand your current portfolio. Drop Shipping has become a industry buzzword as a means of selling products sourced from multiple suppliers and where used effectively, can provide a positive cash flow and and quite possible that you do not need to carry inventory as it is shipped to your customer via a 3rd party.
Here are some Facts: Generally most of the drop shipping suppliers and fulfilment services are based in USA or UK, supporting major brand retail stores; however trends emerging from China which offer drop shipping services to both companies and individuals make this more competitive to compete with same-country distributors and the ever expanding world of the internet.
Just some Drop Shipping questions to consider:
1) Where do you want source your products from and what are the lead times from purchase to receive times?
2) Can you purchase single items or do you have to buy bulk items in advance?
3) Do you have or require storage facilities?
4) Are you responsible for delivery of the product and what locations do you want to sell to? Also consider that if you intend to sell your products globally that you should be informed of import policy as you are responsible for assuring that the product can be lawfully imported to the destination country .
5) Are the international freight costs covered by the Supplier?
6) How are the products packaged and labelled – they may not options to put your logo on the product?
7) If you have a large order from another country such as China, will Customs seize the order? This is a genuine possibility and the options would be to split your orders into several smaller packages, this again would add to your shipping costs
8) Who pays for customer duties? It will be your responsibility as the buyer for any custom duty fees that may be charged depending on each country Custom Policy
9) How are product damages and complaints handled by the Supplier?
10) How does the Suppiler handle backorders?
Risks to consider: Be warned there are growing ‘home based business’ opportunities that are described as a lucrative business with little or no time and money required.. Generally these ‘opportunities’ are set up with high margins with little profit and may cost you a regular service fee. An example of a company that went upside down was Ozdirect. “The ACCC alleged that Ozdirect accepted payment for goods hen the company had “reasonable grounds” to know it could not supply them “in a reasonable time.” Sourced from http://www.news.com.au/business/ozdirect-ordered-to-curb-conduct/story-e6frfm1i-1225755504071#ixzz1KbCvcw00
In Summary, the key to establishing yourself in this market is to ensure that you have researched your products, formed a good relationship with your supplier and your products can be delivered direct to you or your customer’s door.
Like any business, this will take time and you will need to ensure that your foundation is rock solid and ability to manage the online site for customer retention and growth – if you have this in control then you can look forward to developing a sustainable business. Lastly if you do decide that drop shipping is right for you be sure to research your product and conversion strength, the last thing you want is a product that attracts dust not profit.
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