Drop Shipping:
Problem Solver or Just Another Expense ?
Many soon-to-be, on-line entrepreneurs create business plans that assume that these fledging, commercial sites will handle order fulfillment in-house. That means the Chairman of the Board and CEO will not only empty the waste baskets, she’ll also pack up orders and make a daily trip to the post office.
With any start up, “cash is king.” You need it for everything from hosting fees to site development to postage stamps. Oh, then there’s inventory – 2000 basketballs stored in the spare room. Most start-ups handle every chore, and for some that’s fine. For others, that daily trip to the post office is the least productive chore of the day.
Drop Shippers
These companies are in the business of order fulfillment and there are two kinds in this broad category. The first ships only products it manufactures or distributes. You’ll often see these companies in affiliate programs wherein your site captures the order, it’s sent automatically to the company warehouse from where the product is shipped. You receive a commission and/or flat rate on each affiliate sale you make. That’s drop shipper type one.
The second is the drop shipper for hire. They’ll store your inventory in their warehouse (usually for a fee) then pack and ship as orders are received from you. Some of these businesses are also called fulfillment houses. In addition, most fulfillment houses will assemble, pack and ship items so if “some assembly is required,” look for an active fulfillment house. By the way, it doesn’t have to be close by as long as they have an email address so, if cost is a factor, consider outsourcing assembly and shipping overseas.
In any case, shop around and do some comparison shopping for your shipping. This is a highly-competitive niche sector so you can find good value for your money. And haggling is allowed most times so engage in some negotiation before accepting the drop shippers “standard” S&H fees.
Do I Need One?
Well, obviously if your product is information (data) then no, you don’t need one. But, if you plan to sell a product, or lots of products, consider hiring a drop shipper. Here’s why.
Let’s say you sell aquarium supplies on line and on a typical day you receive 30 new orders. (Good going, btw). Okay, first you need the room to store your inventory. It must be dry and secure. The garage may not be the best place to store aquarium supplies.
Then, you have to pull the 30 orders. Some will include multiple items. Once pulled, you must review the paperwork to determine which customer receives which item(s). Then, there’s the actual packing with bubble wrap or popcorn, taping and securing. An address label must be affixed. The package must be weighed and proper postage glued in place.
Next, load the packages (some are heavy), drive to the post office, wait in line, off-load 30 packages, go back to the office and finally get to work. You can see how much of each day is taken up with shipping and handling. And even if you put the kids to work handling orders, how long do you think that’s going to last?
Lots of start-ups begin as part-time jobs. Come home each day from your 9-to-5 job and start working on your digital dream. In this case, you could find yourself wrapping orders at midnight when that dream starts to look more like a nightmare.
There’s no doubt that drop shipping should be included in many on-line business plans. If you’ve got the time and patience to do it yourself, great. Save the money. But remember, you’re giving up business-building time to handle administrative chores.
How much?
Of course, it depends on how long it takes the drop shipper to wrap an order, its weight, postal zone and other unpredictable factors – another good reason to shop around. The lowest per unit price may not be the lowest total cost if the package is being shipped from half-way around the world.
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