Essentials of Selling Products Online Easily
This blog post explores the details of selling products online. It takes a closer look at the drop shipping method as a superior supply chain management system.
Drop Shipping Method for Selling Products Online
In the early 2000s, opening an online store required much more capital and time investment. Online retailer had to order products from suppliers in bulk. Then, they had to stock them. This meant taking an inventory risk. Online retailers can now avoid the inventory risk thanks to the drop shipping method. Drop shipping method has peaked over the last 10 years. It is not a mere coincidence that drop shipping method gained popularity around the same time with e-commerce.
It is now safe to say that drop shipping is the future of selling products online. Its exponential increase only means that it will dominate other methods as the primary supplying method for online retailers.
How Drop Shipping Method Works Step by Step
Although there are a lot of misconceptions about drop shipping, it is a fairly simple method. It`s primary focus is reducing the risk that the retailers take while selling products online. Selling products online using drop ship method follows these steps:
- The online retailer finds a drop ship supplier, who will stock a wide selection of products in their warehouses.
- Retailer then lists the products s/he wants to sell either in an online e-commerce marketplace. These marketplaces may include Amazon and eBay. Retailer can also choose to sell in her/his own custom made online store. Clearly, the retailer needs to list a product that is in stock in the warehouses of the supplier. It is important that the drop ship company provides up-to-date inventory list to their retailers to avoid overselling. Now the retailer needs to wait for that sweet first order!
- When a customer makes a purchase online, the retailer submits the order to the drop shipping supplier.
- When the drop ship supplier receives the order, they get it ready for shipment as soon as possible. Time that passes between the placement of an order and product`s shipment is called lead time. Shorter lead time means improved sales.
- Drop shipping company ships the product(s) using blind shipment method from one of their warehouses, which is the closest one to the customer. That means the end customer will not see anything on the package about the drop ship supplier. They will not know that it was shipped directly by the supplier.
- The end customer receives the order. If they are happy with shipping time, condition of the package, and the price, they are likely to order again!
- Supplier updates the inventory data multiple times a day. A good supplier will also provide latest image data of the products. With the latest data and real wholesale prices, the retailers will keep ahead of their competition.
Choosing the Ideal Category to Sell In
There a lot of categories for selling food online, using the drop shipping method. Choosing the right category can directly affect the success of the business. Without a doubt, brand name natural, organic and specialty products are one of the most profitable categories to sell in. There are two simple reasons for this:
- Low return rate: Brand name natural, organic food, and specialty products have much lower return rate than other categories such as clothing. Your online customers are already a fan of their favorite brand name products. As long as they are content with prices, shipment and product`s condition, they will not need to return them.
- Repeat business: Everybody needs food. Grocery category has one of the highest re-order rates because people buy groceries regularly. Many customers have trouble finding their favorite organic products at their local grocery store. If you can provide them with these products, they will happily order from you again and again. Isn`t it so convenient?
Check out my previous article on how to Make Money Selling Online for more details.
Your Marketplace Matters
A lot of thought goes into finding the right location, when traditional retailers decide to open a store. Similarly, where you start selling products online also matters a great deal. Marketplaces such as Amazon and eBay have an incredible market reach as millions of customers shop online through their website. Their credit cards are saved and they are ready to shop. However, there is one problem: very high competition. In order to stay ahead of their competition, the online retailer needs to have a great seller`s rating. This is directly related to the drop ship supplier. They directly affect shipping times, and the condition of the product.
An online retailer may also decide to choose to sell in their own online store. This means more freedom and less regulations. However, it also means less market share and more marketing fees. The retailer needs to make an educated decision while choosing the platform.
Read more about which platform might be ideal for you.
How to Avoid Overselling
Overselling is a retailers nightmare. Nobody wants to explain to a customer why the item they purchased is out of stock. To avoid this problem, the retailer needs to be proactive. The online retailers most important tool is an up-to-date inventory data provided by the drop ship supplier. Thanks to the inventory data, the retailer will never list a product that is out of stuck in the supplier`s warehouses.
Overselling must be avoided at all costs because it simply means losing the customer in most cases. Considering the fact that acquiring new customers is very expensive, the retail should not miss the opportunity of a repeat business.
Lead time, Transit Time, Order Visibility, and Shipping Costs are the Essential Factors for Success
This is basically the time that passes between the placement of an order and its shipment. Studies show that having a shorter lead time significantly improves sales. Because reducing the lead time can improve sales to a great extent, it should be a priority for both retailers and drop shipping suppliers.
Lead time plays an enormous role in inventory management. An ideal drop ship supplier and retailers should be able to automatize data entry to process orders faster.
A great way to start on automating processes is to use inventory management software. Thanks to the software, one will no longer have to record every purchase order manually. Inventory management software will be able to generate purchase orders whenever inventory levels hit the reorder point.
Fast shipping is one of the most important factors in the success of selling products online. Customers hate waiting for their shipments for a long time. Besides, sometimes the items they purchased are very time sensitive. This is especially the case in holiday seasons. Customers purchases gifts that should arrive before the holidays. That`s why it is important to choose a drop ship supplier that can ship fast.
This is much more important than some people think. Enthusiastic customers want to be able to track their package and see where the order is. If there is a delay, they want to know the reason.
This can be a big problem with drop shipping suppliers based in China. For such suppliers, long transit times are not the only problems. There are other problems. Giving an estimated shipment time is harder because it is more difficult to foresee any potential delays at customs. Additionally, most suppliers from China are not able to provide customers with tracking numbers.
Shipping costs are also very important in retailers profit margins. They are not covered by the drop ship supplier. Shipping cost is directly transferred to the retailer. Whether to charge customers shipping fee or choosing higher prices to make up for shipping cost is retailer`s decision.
Drop ship suppliers make deals with carriers. It is important for a retailer to choose a drop ship suppliers that has affordable deals with carriers!