Drop Shipping: Ups, Lows, And Everything You Need To Know

Drop Shipping

Drop Shipping: Ups, Lows, And Everything You Need To Know

With the continuous growth of e-commerce, geographically-constrained consumers no longer restrain today’s market flow of demand. One of the perks of having the Internet is allowing retailers, regardless of how big or small, to market and sell their items to pretty much anybody, anywhere in the world. Among the fast growing trends of today’s e-commerce is drop shipping.

But what exactly is drop shipping?

Drop shipping is a form of retail fulfillment wherein the retailer does not keep their products in stock. Instead, the retailer transfers the customer’s orders to a third party who will then fill in and ship the items directly to the consumer. The third party could be any of the following: a manufacturer, a wholesaler, a distributor, or another retailer. As a result of using this method of retailing, the retailer does not handle stocks or own inventory of the products being sold.

The Supply Chain Of Drop Shipping

The supply chain is a term used [in any businesses] to define the sequence of or production and distribution of a particular commodity. In simpler words, the supply chain is the process a product undergoes from conceptualization to manufacturing, before finally landing in the hands of a consumer. In drop shipping, there are three supply chain players involved: the manufacturers, the wholesalers, and the retailers.

Manufacturers – are the ones who create the product and don’t usually sell them directly to the consumers. Instead, they offer their goods to wholesalers and retailers. Buying straight from a manufacturer is the cheapest option to buy items for resale, but most of them require a minimum amount of purchase that you have to fulfill.

Wholesalers – typically buy products in bulk from the manufacturers and sells them to retailers. They mark the products up slightly, and they rarely have minimum purchase requirements.

Retailers – or merchants are entities that sell marked up goods directly to the public.

Having just discussed the supply chain of drop shipping, you will notice that “drop shipper” is not listed above. Why? It’s because drop shipping is more of a service and not a role. To put things into a simpler context, any of the three mentioned above can be the drop shipper.

The Process Of Drop Shipping

Drop shipped items undergo four steps before they are fulfilled. In this section of the article, we will have a look at the step-by-step process of drop shipping.

Step One: The customer places an order through an online store. The website will accept the order, and the customer will then pay for the item. The payment will be deposited directly to the online store’s account.

Step Two: The online store will fulfill the order for the customer, and forward it to the supplier (could be a manufacturer or wholesaler) and pay the wholesale price of the item and shipping. The supplier will then generate an email confirming the [online] store’s purchase, and the store will forward a closely identical confirmation email to the customer.

Step Three: Assuming that the item being purchased is in stock, the supplier will then prepare the package and ship it directly to the customer. The online store will receive an email from the supplier, stating that the order has been shipped along with its tracking number.

Step Four: The online store will inform the customer that the order has been shipped and will forward the tracking number via email. After having collected the payment for the item, on the way for shipping, and the customer informed, the fulfillment process of drop shipping is complete.

The Advantages of Drop Shipping

1.Drop shipping does not require a huge capital

This is most likely the biggest advantage that comes along with drop shipping. You can start your very own e-commerce site without the need to invest thousands of dollars in your upfront inventory. Additionally, as drop shipping basically works by taking orders from customers and passing them onto a supplier to be filled in and shipped, you won’t have to make a purchase unless the sale has already been made and paid.

2.Drop Shipping is easy to set up

Any type of e-commerce business becomes a lot easier to handle when you don’t have to get yourself involved with physical products. With drop shipping, that is about the entire case, as:

There is no need  to manage or pay a warehouse where you keep your stocks

There is no need to worry about item packaging and shipping

There is no need to continually order products and maintain a distinct margin of stock level

3.Drop shipping can be done anywhere

You can run your own drop shipping business anywhere, as long as you have a reliable Internet connection. All you need to do is communicate with your suppliers and customers, and you can manage your drop shipping business wherever you want.

4.Drop shipping offers a broad range of products

Without having to purchase the products you offer prior to listing them, you have the freedom to market a wide selection of different items to your customers. Moreover, if your supplier stocks an item, you can have it listed on your website at no extra cost.

5.Drop shipping comes with lower overhead expenses

Since drop shipping does not require a warehouse to maintain nor an inventory to stack on in the first place. As a result, your overhead costs are also significantly lower compared to most traditional brick and mortar businesses.

The Disadvantages of Drop Shipping

1.Drop shipping is prone to having inventory issues

When you stock all of your products, keeping track of what’s available and what’s not would be easy. However, in drop shipping, it is the exact opposite. Since you are sourcing from different warehouses which may also be fulfilling other merchant’s supplies as well, the inventory always changes. And while there are many ways in getting sync with your suppliers, they won’t necessarily guarantee a seamless solution.

2.Drop shipping is prone to having customer service issues

Drop shipping is a method wherein you rely on a third party to pack and ship your products. That said, it means you have no control over a large part of the customer engagement. If by any chance, a shipment gets delayed or encountered a problem along the way, you won’t have the necessary details and information on hand once your customer calls for query or support. It will take a little longer to fix the problem as the query would have to go through your third party supplier before it can be given a solution.

3.Drop shipping has low margin profit

Having low margins is possibly the biggest disadvantage of drop shipping in a highly competitive environment. Because it was so easy to get started with, and the overhead costs are very minimal, most merchants set up this kind of business and tend to sell their items at the lowest price possible while attempting to grow their revenue. More than that, you can’t keep consumers from comparing your prices to others, which can eventually destroy your profit margin.

Drop Shipping And How It Would Benefit Your Website

  1. Drop Shipping Provides Practicality For Websites That Sell Big and Bulky Items

Among the sellers that benefit the most on drop shipping are the ones who sell big items, such as car parts, furniture, and the like. Drop shipping is convenient for these merchants as they get to sell bulky products without having the need to store them in a warehouse. Doing so saves them not just the hassle of purchasing and shipping stocks into the warehouse, but also saves them a good amount on overhead expenses.

  1. Drop Shipping Allows A Seller To Have Inventory In Different Warehouses Across The Globe

Since drop shipping does not require a specific retail location or storage facility, a merchant can have access to different inventories across the globe. This benefit of drop shipping allows the seller to have a wider variety of products to sell and the opportunity to have the flexibility to ship pretty much anywhere in the world.

Drop Shipping And Why You Should Try It If You’re Looking To Sell Products Online

Just like everything else in ecommerce, drop shipping comes with its own pros and cons. But what makes drop shipping stand out is the fact that it provides convenience, practicality and flexibility in more aspects compared to an ecommerce business that doesn’t drop ship. Drop shipping has very minimal risks when it comes to monetary investments (as you don’t have to pay for a  huge amount of money for upfront supplies), and provides lower costs in terms of product launching and shipping. Additionally, drop shipping can be easily started and done anywhere – even at the comfort of your own home. It’s a business that provides good profit at the most practical and convenient way possible.

Have a question ?
Let us help you !

9 + 2 =

Latest Articles

Affiliate Marketing Basics

Affiliate Marketing Basics

Affiliate Program Basics

Anyone who understands the basics of sales and marketing can understand affiliate programs. A company that offers products or services directly to consumers or to other companies always wants to increase their sales. They can either hire more employees for the sales team, tweak and test new marketing avenues, or start an affiliate program. Most do multiple things at once, but courting affiliates to market for them may net them the greatest value.

The company controls the product manufacturing or procurement, warehousing, and shipping. People who sign up to earn from the company’s affiliate program advertise the company’s products. Every time their special link is used to make a sale, the affiliate earns a flat dollar amount or a percentage of the total sale.This makes affiliate programs a win-win solution for both companies and individuals looking to grow an income from home. Increased sales drive business success and allow people to earn real money without shouldering the risk of running their own company or buying inventory.

Affiliate Networks Explained

While many companies offer programs directly to individuals who want to make some extra money online, others combine forces and use an affiliate network to push their program. Commission Junction forged the way in 1998. Since then, other networks have opened, each with their own collection of businesses and offers. The benefits for these companies is considerable. They get more attention from potential affiliates than they would get if they only offered the business option on their own website.

Individuals who want to earn also realize great benefits from affiliate networks. While copious amounts of information exist for those who want to learn the most lucrative details of an affiliate marketing business, it is possible to get started with little more than a blog or social media account. The accessibility of the earning opportunity makes affiliate marketing a top choice for many internet professionals and total beginners alike.

Who Offers the Best Affiliate Programs?

By a considerable margin, Amazon offers the largest number of vendors to represent with affiliate links: 1.5 million on average. They offer a wide range of links and graphics to use, but their earning percentage starts at 4%, lower than most others on the list.

Clickbank focuses on ebooks and other information products rather than services or tangible goods. As long as due diligence is taken when choosing a product to promote, earnings can be quite high with many commissions over 50%.

CJ Affiliates, originally called Commission Junction, has over 3000 merchants from a vast array of industries and niches to choose from. They offer varying percentage payouts. Although CJ offers every possible product to promote, requirements and reports might be complicated for beginners.

For people who own their own website or blog centered on a particular niche, individual companies may offer affiliate opportunities not associated with networks. If a particular product line or service catches the eye, check the company website or contact them to see if an earning program exists.

Why Affiliate Marketing Works

Add up all the positive benefits from both sides of an affiliate marketing relationship, there is no possible mystery as to why it works. For companies who want to push products or services, it gives them the opportunity to recruit a sizable sales force without having to pay employee salaries or train current ones in new marketing techniques.For people who want to earn by encouraging shoppers to buy particular products or sign up for specific offers, affiliate marketing provides the vehicle necessary to create a genuine and potentially substantial income. Since its early days of simple commission payments for referrals, affiliate marketing has become a multi-billion dollar industry.


Have a question ?
Let us help you !

11 + 2 =

Latest Articles

Ad Serving Network / Ad Network

Ad Serving Network / Ad Network

Ad Serving Network / Ad Network

When a website starts to generate a significant amount of traffic, the owner will monetize that site by selling advertising directly. Along with direct advertising, a website owner should also look into joining an ad serving network to expand revenue. The process of joining and using an ad serving network is easy, and it can turn into a significant source of revenue for any website owner.

What Is An Online Ad Serving Network?

An ad serving network hosts ads through its server, and then displays those ads on designated spaces throughout your website. The website owner choose where the ads will be seen, and they are also given the ability to choose what types of ads appear for the traffic to see. The site owner is given access to very detailed analytical information that helps to decide which ads perform best on their website, and other critical details that affect how much revenue is made.

What Types Of Ads Will Be Seen On A Website?

The versatility of ad serving networks is one of the things that draws many website owners to them. Ad serving networks have the ability to display images, text ads, links, videos, banners of different sizes and orientations, short ads and long ads. It is all based on what the website owner feels their audience will read and what the network feels will be effective. The website owner in an ad serving network is called a publisher.

As a publisher, they choose the types of ads and how often they are shown to maximize revenue. The ad server provider will give all of the data needed to find success.

Who Offers Ad Placement Services?

An enterprising website owner could invest in their own ad server and buy their own software, but that would be time consuming and expensive. Since there are many reputable ad server providers available, it would also be unnecessary to set up an ad content server.

Some of the top ad placement services providers are Google, Infolinks, Revcontent, the Adsterra Network, Advertising.com, Blog Ads and Haxhax. These providers already have a large network of clients and ads that will be used to place advertisements on any website. This takes all of the hard work off of the website owner’s shoulders and allows them to focus on making money.

The Registration Process

Many ad server providers have criteria a website must meet before it can be added to the network. The most common criteria is a minimum number of web hits each week or month, and the network can determine the number of hits a website gets from common tools available online. The registration process is usually simple and starts with filling out a short online form. The ad server network will then look over your website and analyze the website’s traffic data and the content the website features to see if the website qualifies to be a publisher. If the website fits the server provider’s criteria, then the site is made part of the network. Most ad serving networks do not charge publishers any fees to join or be part of their organization.

Getting Paid From An Ad Service Network

The network calculates how much money a website generates based on interactions with the advertising that is placed on the site. For example, a service may pay monthly based on the revenue generated every 45 days. That means that the revenue builds up over 45 days, and then get paid out the next monthly pay period.Most ad serving networks pay through Paypal, direct deposit or through an online money transfer service such as Payoneer or eCheck. Some providers have a minimum earnings threshold a payment must reach before it is released, while others pay each standard pay period regardless of how much money is in the account. It is a good idea for each website owner to investigate the specifics of an ad serving network before signing up to make sure that the network offers the pay options the website owner is looking for.

How Is Revenue Calculated?

There are several ways that ad serving networks calculate how customers interact with the advertising on a particular website. The most common methods are Cost Per Click (CPC) and Cost Per Thousand (CPM).

The CPC methods means that the publisher will get paid each time an advertiser’s ad gets clicked. This method for getting paid is effective if an advertiser is running a short-term campaign, or if the advertiser is trying to get feedback through a direct response marketing plan.

The CPM method pays the publisher for every 1,000 impressions of an ad that is shown on the publisher’s website. With the CPM method, the publisher gets money every time they display an ad. This means that the published does not have to wait for an ad to be clicked to get paid.

These two payment methods are extremely versatile and allow a publisher to set pricing any way they see fit. A publisher can create a large matrix of pricing options based on ad size, and the publisher can also offer special pricing for promoting items such as newsletters and featured products.

Ad Serving Networks Versus Affiliation Advertising

One type of online marketing that gets compared to ad serving networks is affiliation advertising. While both marketing methods use similar forms of pay per click advertising, affiliation advertising is often more difficult for website owners to predict. With ad serving networks, the website owner can choose which companies to work with and make changes based on the performance of their advertising. With affiliate advertising, the host company can make changes that may not work for the affiliate, but the affiliate has little recourse. The control offered to the publisher in an ad serving network can help make it easier for the publisher to make money, while the affiliate could wind up with programs that bring in no revenue at all.

A website owner that wants to generate more revenue with their growing web traffic will want to look into joining an ad serving network. The versatility of an ad serving network coupled with the control a publisher has over what kind of ads are seen on their website makes ad serving networks excellent ways to make money.


Have a question ?
Let us help you !

11 + 2 =

Latest Articles

//Added by Nadav On Oct 4, 2019