Ecommerce Merchants: So You’re Thinking About Drop Shipping?

One of the most common questions I hear from new online sellers, or those considering online selling, is, “Should I use a drop shipper?”

Most experienced ecommerce merchants will immediately say, “No!” Others will say “It depends…”

Depends on what?

Really, it does depend – on what you mean by “drop shipper.”  Wikipedia defines drop shipping as: “Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.”

Hey, if you have a manufacturer that is dependable, willing, and has the processes in place to drop ship for you, then you’re on the right track.

But if you are thinking about paying money and signing up for a “drop shipping service” than you’re on the wrong track.

This post is going to concentrate on the latter, because that is what most people are referring to when they ask the question, “Should I use a drop shipper?”

There are many pitfalls to using a drop shipper, especially one that advertises heavily and requires a fee to subscribe to their service. For instance:

You think you’re the only online seller who’s heard of this company? Of course not.

More than likely whichever online marketplace you are considering selling on is flooded with products from this heavily advertised drop shipper.  Because these drop shipper’s items are everywhere, it forces the prices down and you will be lucky to make any profit at all.

You have no control over how your customers’ orders are shipped, or how quickly they are shipped.

This can adversely affect your feedback on whichever marketplace you are selling. Even if you choose to only sell on your own website, slow shipping, and poor packaging, can ruin your reputation and lose you customers.

Out of stock items.

There is nothing that makes a customer angrier than ordering an item and receiving an email a few days later that their item is out of stock.  You have no control over your stock when using a drop shipper. Something that is in stock on Monday may very well be out of stock on Saturday when your customer purchases it from you. This is the quickest way to earn negative feedback on both Amazon and eBay.

If you’re considering selling on either Amazon or eBay, negative feedback can quickly ruin your business, so you want to have as much control over your customer service and merchandise as possible.

The best way to do this is to stock your own products. There’s nothing wrong with starting small, testing the market on a few products, and building from there. That is how most successful ecommerce merchants started.

Once you get a feel for your market, and have established suppliers, you may find a supplier or manufacturer who is willing to drop ship for you.

That is the type of drop shipping to consider, if you consider it at all.

Image: Louis Vest, Creative Commons

Guest post by Cynthia Lizana, immediate past president of the IMA. Cynthia is the President of TexCynGoods, Inc., which specializes in selling women’s wallets, handbags and related items online.