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Managing Dropshipping Business Without Inventory

by Biljana Denic

Your bills have been stacking up since the pandemic began and you are thinking of ways you can earn money. Before you invest in a pyramid scheme or set up a lemonade stand in your front yard, you may want to consider starting a dropshipping business.

A dropshipping business is a way of selling products without maintaining inventory. A company that employs dropshipping will sell its wares online and pass the orders to a third-party warehouse that will fulfill the order.

It is a very popular method of doing business these days. Many companies that do business on e-commerce sites such as Shopify and BigCommerce employ this method. Selling products using the dropshipping method is a way of launching a business with very little financial risk,

Whether you want to sell custom t-shirts, a novel, or an exotic hand cream, dropshipping is a good way of getting your feet wet and gauging the public demand for your product. Since you will not have to worry about managing inventory, you can focus on marketing your product.

Although it is a fairly simple, hassle-free way to start a business, you should remember the old adage that says the devil is in the details.  If you decide to run a dropshipping business, there are a few basic management tips you should follow.

Don’t Expect a Miracle

Source: shift4shop.com

You will not have to invest a lot of money to start a dropshipping business. However, you should know that your initial profits might be rather low. An e-commerce business is a good way to introduce a new product to the public. Be sure to shop around to find a reasonably priced on-demand warehouse and shipping company that has a good reputation.

Bear in mind that you will have plenty of competition as there are many E-commerce stores out there. Plenty of people with great ideas want to launch their businesses with little overhead.

You will not have control over your inventory. Therefore, you will not have control over the quality of the products. You should research online reviews of potential shipping companies to make sure the quality meets your standards.

The Biggest Benefits of Dropshipping

Although drop shipping may not be the most profitable type of business, it has many benefits. It gives you the opportunity for trial and error with various aspects of your business.

Manage Your Market Research in a Cost-effective Way

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Inexpensive market research is one of the biggest benefits of a dropshipping business. It would normally cost a company thousands of dollars to hire a market research company to figure out how to advertise a product.

You can try posting product links on social media to see how people respond. You can try different hashtags on Twitter and groups on Facebook as well as A B marketing posts. You can try to market different variations of your product and see which one sells best.

Do you have a great idea for a tee-shirt slogan? You can try to see how it sells on various styles of tee shirts, sweatshirts, or even socks. If your slogan doesn’t turn a profit on a shirt, you might want to consider putting it on a mug or hat. You can experiment as much as you want when you use a dropshipper because you don’t have to have anything printed.

If you have several products that you are thinking of selling, you can find out which product sells the best and which is the least popular. You can figure out how many of each item you need. When you are ready to start warehousing your own product, your experience with dropshipping will tell you how much to order of each product.

It can Save You Shipping Fees

Source: leanschi.com

The logistics of shipping is one of the most complicated elements of any business. You have to either ship your products out on an on-demand basis or sign a contract with a shipping company.

If you have your own warehouse, you will have to figure out the proximity of the shipper to your warehouse in addition to the price. If you are shipping overseas, you may have to deal with importing and exporting laws. Even if you are only shipping to another state, you may be subject to taxes and fees. You may also have to coordinate several different types of shipping to get your product where it is going.

If your product is really successful, you may want to consider opening local or regional warehouses around the country. Amazon has local warehouses in some cities, but not others. Those warehouses stock their most popular products in that region. They handle their own deliveries of those products in those areas. They save money on shipping when they do this.

When you begin your business, you can use a drop shipper to determine where most of your customers are and what products they like the most. If your product is especially popular in one part of the country, you may want to consider opening your warehouse there.

If You have Large Products, a Dropshipper may Make More Sense

Source: xsellco.com

If you are selling key chains or refrigerator magnets, you may be able to store them in your attic, garage, or spare room. If you are hocking custom-made blankets, designer fenders, or inflatable canoes, it may be very expensive to warehouse your product. A drop shipper will have a huge warehouse that should be able to accommodate any product you sell.

Backup Your Inventory

Having a backup plan is important to the management of any shipping business. If you do not have enough inventory to fulfill orders or if you are going to exceed the number of shipments specified in your contract with your shipper, a drop shipper can be a great backup plan.

You may also want to test out new products without ordering and storing inventory. A dropshipper can help you test individual products before you add them to your warehouse.

Starting a business is exciting and exhausting. Managing your dropshipping business effectively will allow you to gauge the need for your product, the proper way to market it, and the places where it will be the most popular.

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