Drop the Costs With Drop Shipping

by / ⠀Startup Advice / July 12, 2011

When starting any new business, a common problem is inventory.  How many units do I buy?  Where do I store them?  And most importantly what do I buy?

These questions can be troublesome, confusing, and wind up costing you a lot of money.  Fortunately for business owners there is one magic word that can ease all your pain, drop shipping

What is Drop Shipping?

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 seller.

Why Drop Shipping?

Drop shipping has many obvious advantages to a retailer, most importantly cost.  Starting a new business can be expensive, but add in the costs of purchasing up front inventory, a storage facility, and warehouse personnel, the start-up costs goes from expensive to astronomical.  It is not necessary to incur the huge overhead costs associated with managing a warehouse full of products.  The drop ship model is the ideal solution for e-commerce business, especially when you offer many product SKU’s.  Utilizing this management technique benefits both the consumer and the retailer.  The consumer is able to browse through countless products and options in order to satisfy their personal tastes and the retailer is able to increase their sales due to a larger selection – a win, win situation.

How Do I Get Started?

I worked in a retail kitchen and bathroom showroom prior to starting my own business, so over the years I established relationships with manufacturers who sold bathroom and kitchen cabinets.  I used these existing relationships to set up meetings to discuss the drop ship business model and establish a working relationship with my company.

It may be difficult for a company with no prior sales to get a willing drop shipper.  Manufacturers don’t want to work with an unproven commodity that does not have an existing distribution channel.

If you don’t have prior relationships with manufacturers that you can leverage, utilize the power of the Internet!  The internet is an unending wealth of knowledge for new business owners.  There are excellent websites that allow companies to connect with manufacturers of many different types of products.  Doba and Alibaba are two of the most reputable websites on the Internet in the drop shipping industry.

Take Care of Your Customer

Make sure you work out an efficient logistic plan with the manufacturer that addresses common issues that will arise during shipments (e.g. damages, missing items, returns) It is imperative these procedures are ironed out before selling products in order to ensure a streamlined process that will service customers in need.  For E-Commerce, list your policies and procedures clearly on the websites FAQ.  Take care of your customer’s concerns and they will reward you with their purchases.

Anthony Saladino is Co-Founder and CEO of Kitchen Cabinet Kings, a leading distributor of quality bathroom and kitchen cabinets on the Internet.  Anthony is a member of The Young Entrepreneur Council, a nonprofit organization that provides young entrepreneurs with access to tools, mentorship, community and educational resources that support each stage of their business’s development and growth.  Connect to Anthony via Twitter @cabinetkings.

About The Author

Matt Wilson is Co-Founder of Under30Experiences, a travel company for young people ages 21-35. He is the original Co-founder of Under30CEO (Acquired 2016). Matt is the Host of the Live Different Podcast and has 50+ Five Star iTunes Ratings on Health, Fitness, Business and Travel. He brings a unique, uncensored approach to his interviews and writing. His work is published on Under30CEO.com, Forbes, Inc. Magazine, Huffington Post, Reuters, and many others. Matt hosts yoga and fitness retreats in his free time and buys all his food from an organic farm in the jungle of Costa Rica where he lives. He is a shareholder of the Green Bay Packers.

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