To be honest, dropshipping is more of a sideshow than a main attraction. Although it has many drawbacks that make it unsuitable for business use on its own, it does have certain useful features that can be put to good use by e-commerce businesses.
These four strategies can help you make the most of dropshipping:
1. Conduct a market analysis.
Dropshipping is most effective when used to facilitate some other business strategy.
Dropshipping is useful for conducting market research on unproven products with minimal financial risk.
Instead of increasing your inventory costs by stockpiling an unreliable product, try dropshipping for a limited time to see how it does.
You will learn more than simply whether or not it sells, such as an estimate of how much it sells for, which will help you determine how much initial stock to purchase.
This is especially crucial when trying out new product categories, which inherently involve more danger.
Maybe you've found a lot of luck in the market for dog supplies. Is there a chance that this idea may be used to goods aimed towards felines?
Dropshipping may be a hit or miss, but selling a few items to see how it does is a good way to test the waters.
2. A safeguard against overselling
Professional online retailers are aware of the unpredictability of market shifts. Having a dropshipping supplier on hand is a great way to save money on inventory without having to risk losing sales by not stocking enough to fulfil unrealistic maximums.
Particularly helpful at peak flood times of year.
It's a fantastic hedge against the risks encountered by any store owner.
Having dropshipping options in place also serves as excellent contingency planning.
Pre-made orders can be fulfilled even if something unexpected, like a natural calamity, destroys your warehouse.
This also applies to avoiding unexpected shipping delays.
3. Maritime transport strategies
As your company grows, one of the unintended consequences is likely to be more shipping difficulties. As delivery addresses move further from a company's distribution hubs, the associated shipping costs and taxes will rise accordingly.
If you have trouble making a profit in a certain area, dropshipping may be the answer.
Perhaps the costs of transporting items that far, or of renting storage space, are too costly to warrant opening a new distribution hub.
Perhaps there are additional costs involved, such as customs duties, when exporting internationally. You might be able to avoid going into the red if you rely on dropshipping for just these few regions.
Also, similar to how dropshipping can help with market research, it can be used to try out other geographic markets.
Why not utilise dropshipping as a pilot programme in a potential new market before committing to a full-fledged distribution centre there?
4. Products that require a lot of upkeep.
Stocking and transporting some products is more expensive than others.
It could be more cost-effective in the long run if you dropship the items instead of storing them yourself.
To clarify, what do we mean when we talk about things that require a lot of upkeep?
Items that need to be kept for a longer period of time or shipped to a different location will incur storage and transportation costs.
Products that require a lot of space to store may not generate enough revenue to cover the cost of the extra space they require.
Products that are too heavy to ship profitably through standard methods may be better off dropshipped directly from the manufacturer or wholesaler.
Shipments of fragile items must be handled with extra care. The manufacturer or supplier may be more capable of meeting these standards.
Treasures — Not all storage facilities are equipped to provide the level of protection necessary for storing valuables such as jewels, antiques, etc. In order to avoid having your belongings stolen, you may want to have them stored with someone who takes security seriously.
Perhaps you want to sell some food that must be kept frozen, or some chemicals that can't be exposed to direct sunlight. Drop shipping might be more cost-effective than warehousing, especially if your stock requires climate control.
It is not cost-effective to incur extra storage and shipping expenses for a small fraction of your business unless your organisation as a whole specialised in these products.
However, by using dropshipping to distribute these items, you may still keep your clients pleased.