Drop Everything?
Carol L Schroeder -- Gifts and Dec, 3/31/2011 4:48:13 AM
CAROL L. SCHROEDER
Q: Our business is mostly online, and we are having a terrible time managing our inventory. Slow sellers are starting to really pile up, and we really don't have much capital left to bring in new merchandise.
A: Many web-based businesses are finding it practical to work with suppliers who can ship the merchandise directly to the customer, a practice referred to as "drop shipping." This allows you to feature a company's entire line - without investing in a single piece of in-stock merchandise.
The advantage of drop shipping for online businesses is significant, both in the savings [...] and that it allows a great breadth of merchandise to be featured.
After you process a consumer's order, you upload the customer's shipping information to the vendor, who picks, packs and ships the merchandise. The vendor will create a packing slip (with your company's contact information) and a shipping label. One drawback to this arrangement is that the shipping label will carry the vendor's return address, not that of your business. You won't have your logo and other branding on the package, either.
Another drawback is that there is of course a charge for this service beyond the usual wholesale price of the goods. The cost of processing and packing is billed to you, and it may or may not be something that you can pass along to the customer. If the goods allow for extra markup, you can recoup some of the cost there, and you may also be able to charge the customer extra for shipping and handling.
But the advantage of drop shipping for online businesses is significant, both in the savings on warehousing inventory (as well as in packing and shipping orders) and that it allows a great breadth of merchandise to be featured. Swing Design offers its entire line of contemporary frames, trays and other gifts in its drop ship program, and provides retailers with product images and descriptions.
Clients for drop shipping are mostly huge online retailers such as Amazon and Barnes & Noble, according to CEO Will Haley. However they do offer this service to somewhat smaller businesses as well. Warehouse manager Vince Gaffud is shown here processing drop ship orders for Franklin Covey, a Utahbased business with about 80 retail stores.
It may surprise you how many of your vendors are set up to do drop shipping. Check to see what the minimum order expectation is to participate. A small craftsperson may not care how much volume you generate, whereas others may feel it feasible to work with you only if you expect dozens of orders a day.
If you run a brick-andmortar store, immediate gratification is one of the key advantages that you have over an online retailer. But drop shipping may be worth considering for some items, especially larger items such as furniture. Instead of stocking costly inventory, you can invest in floor samples. Many furniture shoppers are accustomed to waiting for delivery. It is worth exploring whether your customers are willing to wait for drop shipments of other types of unique or expensive items goods as well.
Carol L. Schroeder is the author of Specialty Shop
Retailing: Everything You Need to Know to Run
Your Own Store, published by John Wiley & Sons.
Send questions to SpecialtyShopRetail@ me.com.
We would love your feedback!
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