Tuesday, April 05, 2005

Drop Shipping - Pros and Cons

As an online seller you may enjoy developing and even making your own products, or you may really like to purchase products. You may love to track your inventory, keeping and maintaining space to keep your products, and operating a shipping center. You also may enjoy taking photos and doing write ups, creating and posting listings to online auction sites.

On the other hand, you may not want to do any of these things, but still be an online seller. And if that is the case then drop shipping may be for you. With today's post I just want to go over some of the pros and cons of drop shipping.

What is drop shipping?

Drop shipping is you selling items for a manufacturer or distributor. The manufacturer or distributor does all the product developing, inventory tracking, maintaining inventory and shipping. This allows you to sell high quality, brand-name products on your Web site for a profit.

It is touted as a very good deal. And it can be. As with all kinds of business there are advantages and disadvantages. And as with everything you want to be armed with knowledge. Knowledge is what will help you avoid the scam artists and other unsavory characters that populate the "get rich quick" landscape that we all live in today.

To make drop shipping work you will need to choose a good drop shipper that ships high quality brand-name products that can help you generate sales. This drop shipper must also provide excellent customer service.

Pros to drop shipping

  1. Saves on inventory cost - With dropshipping you do not need to have capital to buy start up inventory. Unlike other businesses you do not need to go out and purchase a lot of inventory to start.

  2. No leftovers - Another part of saving on inventory cost is the savings you get by not having leftover inventory. Because you do not have inventory to start with, there will be no leftovers. If an item goes out of style then you are not left with the losses form not being able to sell it.

  3. Quick selling of new items - Because you do not have inventory, you can change what you sell instantly. If an item is hot you can start selling it very quickly.

  4. No need for storage space - You also save on inventory cost because you do not have storage space. For some online sellers a large cost of selling is the cost of storing their inventory.

  5. Less physical and administrative work - You do not have to wrap and ship anything. You may not have to even do very many write ups or listings. Because you do not have an inventory, you will not have to track it. Or do any of the other administrative work that comes with maintaining an inventory.

  6. Access to a large and varying inventory of items - Just as there is no left over, and you can change items quicker with drop shipping, you also can have access to hundreds if not thousands of different items.

  7. Access to professional quality marketing resources - Many dropshippers provide their sellers with professional quality photos and other marketing materials for the items that they sell.

Cons to drop shipping

  1. Customer service - You are dependent on the manufacturer or distributor to get the customer service correct. If there are problems with shipping (such as items damaged during shipping), your business may be hurt.

  2. Quality Control - You do not have control over the quality of the items being shipped. You are selling items that you may not even see prior to them being shipped to your customers.

  3. Unlimited choices - It can be difficult to decide which items to sell and which drop shippers to use. Also the details of each drop shippers needs to be compared, to accurately figure out the fee structures and other characteristics of the program.

  4. Complicated Fee Structures - There are various fees associated with drop shipping. Many of the promoters of drop shipping will not tell you up front about the fees or they will down play them. So you have to be on the look out for this.

    Fees range from postage cost, required mark ups, access fees, fees for use of online photos and other resources.

  5. Difficult in finding reputable drop shipper - Some drop shipping companies are fronts for manufacturers who are trying to liquidate stock that they could not sell by other methods. And because there is a boom in online selling, they can find online sellers who do not know any better to sell these items for them, and charge them fees to do it.

  6. Lots of Competition in successful programs - When you use drop shipping there is a lot of competition. The most popular drop shippers sign up many online sellers to sell for them. The more online sellers selling any one item, the more competition there will be.

A few Dos and Don'ts when looking for drop shippers


- Do your home work. Before you get involved with any drop shipping company understand all fees involved.

- Do sell what you know and are interested in. You will do a better job at it.

- Do take a look at how competitive the items that you want to sell are. If you chose the most popular item you may have difficulties in selling it.

- Do look at items that you want to sell and contact the manufactures directly. The fewer middlemen the better for you as a seller. You will keep more of the profit.

- Do put as much time and energy into marketing as you can. One of the biggest advantages to drop shipping is that you do not have to worry about inventory, this frees you to concentrate on marketing and getting the product to the customer.


- Don't buy a list of drop ship companies. You can and should develop you own list of products that you want to sell based on your interest and knowledge. You will sell best the things that you know the best.

- Don't pay anyone a monthly fee to sell for them. If a company is charging you a monthly to sell for them, they are probably just trying to get rid of their extra inventory and charging you a fee to do it.

- Don't purchase a turn key solution to drop shipping. Companies that do this are buying stock at whole sale prices and turning around and selling it to you at a mark up. You will save money if you contact manufacturers directly yourself.

- Don't believe all the hype. Drop shipping is not a one size fits all quick way to get rich. Like all forms of business it requires that you do your homework and are disciplined.

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