In today's hyper-competitive retail and e-commerce marketplace, drop shipping can be a valuable way to gain a critical edge for your business.
In this how-to guide to drop shipping, we reveal what it takes to get a drop ship business off the ground and offer pro tips for taking your drop shipping operations from good to great.
Let’s start with the basics. Drop shipping is a supply chain method in which the seller does not own or stock the goods. Instead, goods are shipped to the buyer by a third party, who stores and owns them.
As a fulfillment method, drop shipping is more common than you might think. In fact, businesses across all sectors—not just retail—drop ship. It’s increasingly used in healthcare for example, says Jamie Cunningham, UPS global practice area lead for supply chain optimization and sustainability. Many manufacturers choose drop shipping to fulfill orders directly to consumers for items like durable medical equipment and contact lenses.
For companies looking to get a new venture up and running, there are immediate benefits to drop shipping. These include:
Of course, drop shipping is not all sweetness and light. It comes with its own set of challenges, most notably:
Setting up any new operation requires commitment, and drop shipping is no different. Here are six key steps for getting your venture off the ground:
It takes a village to drop ship well. Luckily, there’s a raft of technology solutions at your disposal to make for successful drop shipping.
Again, do your research. Of the many e-commerce software products on the market, make sure the one you select includes comprehensive drop shipping software. UPS works with several companies that specialize in e-commerce solutions and services. UPS also offers support for drop shipping through the UPS Ready® program.
Work closely with a logistics expert to optimize your approach to drop shipping. One option for e-commerce businesses that offers similar benefits to traditional drop shipping is UPS eFulfillment. This program allows e-tailers worldwide to expedite fulfillment by forward stocking inventory in the United States. For even faster turnaround across the U.S. market, Ware2Go offers an extended network of warehouse locations.
Graduating from drop ship novice to drop ship expert won’t happen overnight. Here are some top tips to speed you along the way:
Even for experienced shippers, however, the difference between low and high-volume sales can still be a shock. "Retailers may normally ship 300 packages daily, but when they have these surges the same vendors can ship as many as five to ten trailers a day,” explains Cunningham.
While drop shipping helps absorb extra demand, start planning for the additional capacity before the surge kicks in. Share information about projected sales demand, and any promotional campaigns, with your supply chain partners in advance.
Even the most established retailers continually fine tune their approach to drop shipping, says Stuart McAvoy, UPS global director of supply chain optimization and sustainability.
“For instance, they're still trying to figure out the ship from store model and what inventory they should keep in their distribution facilities, what percentage they should keep in their retail stores, and how much they should rely on third party drop ship vendors to ship,” McAvoy remarks.
Logistics experts such as UPS can help e-commerce vendors weigh up different approaches and get creative with network design, he says.
In today’s cut-throat marketplace, speed of turnaround truly is a competitive advantage.
So, you’ve done the product research, your marketing strategy is ready, and your software solutions are in place. You’ve set customer service levels, determined your shipping strategy, and you’ve engaged with supply chain partners.
Now it’s time to get drop shipping.
Ready to get started?
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