Steps To Building A Successful Online Drop Shipping Business

Dropshipping is an online business where you have a webstore for promoting your products and outsourcing the order processing, storing inventory and shipping and delivering to a supplier or suppliers.

Although competition is high in this space, considering how easy it is to start the dropshipping business. But you can succeed in this space by adding value to your customers. You should develop innovative ways to differentiate yourself from others and not just become a ‘me too’ brand.

Here are a few important pillars of dropshipping that you should also keep in mind for become a successful droshiper

Contents

1 Inventory

2 Profit Margin

3 Free Delivery

4 Return Handling

Inventory

The biggest challenge most dropshippers face is managing their inventory status updates across various suppliers. You should also be aware that there are other retail businesses the supplier is supplying to and that keeping track of your products at the supplier’s end is essential before he runs out of stock.

It would be easier if the inventory updates were in real-time. However, not all suppliers provide this facility. So, if you are careless, you may end up with no stock and apologize to customers for not being able to fulfill their orders. Worst case scenario, end up losing customers.

You may overstock if you cannot liquidate your stock during the season and end up with deadstock, resulting in a loss of reputation or revenue either way.

Profit Margin

Another vital pillar or a significant aspect of dropshipping is the profit margin. For any business, profitability is the yardstick by which you measure the success of a business or lack of it. This is true of dropshipping too.

Optimizing your profitability ensures you stay afloat by managing your overheads efficiently. It also means you have a great product, and your marketing initiatives bear fruit. The profit margin is your selling price minus the expenses (including the cost of your product and other expenses).

So, if your product is no different from your competitors and sells to the same segment, you may have to price your products more aggressively, sacrificing some of your profit margins.

Free Delivery

Consider the following statistics from savemycent

• 90% of consumers would shop online more often if given the option of free delivery.
• 24% of consumers would spend more to qualify for free shipping.
• 73% of people are more likely to buy an item if it includes free delivery.
• Companies with free shipping have a 20% higher conversion rate than those without this option.

Free delivery is one of the potent weapons eCommerce businesses use against the competition to attract customers.

Free delivery has myriad advantages:

• Increases Sales – As we can see from the above stats, offering free delivery increases overall sales revenues.
• Promotes Customer Loyalty – Free delivery is a great marketing tool to promote an online store and acquire new customers. It also encourages customers to come back again to shop from the same store.
• Enables Increased Average Order Value – Customers are likely to shop for more from a store offering free shipping or delivery, thus increasing the order value. A few online stores also bundle a minimum order quantity to claim free delivery, thus promoting increased order value.
• Prevents Cart Abandonment at Checkout – Many customers will abandon their carts if the online store adds shipping costs at the time of checkout.

Hence free delivery is one of the vital strategies that we must consider to grow an online business.

Return Handling

For any eCommerce business selling products, handling returns and refunds are inescapable. According to payment gateway, 25% to 40% of all online product orders are returned during the festive season. It also says that small businesses need to handle the returns efficiently to avoid losing 25% of their profits. We need to consider the following costs for returned products:

• Logistics costs: Includes costs for returns shipment, restocking and re-shelving costs in the warehouse and warehousing costs.
• For Faulty Products: These could be repaired and require additional repair costs.
• For Damaged Products: Damaged products cannot be resold and must be disposed of, which may involve costs for disposal.
• Reselling a returned Product: Costs involved are refurbishing costs and costs for restocking and repackaging.

Have a clear return and refund policy to make it a painless process and gain a modicum of success in return handling. Research has shown that most shoppers check a business’ returns and refund page before making a purchase.

Conclusion
Dropshipping is still profitable if we consider the above points at the planning stage. However, we also suggest partnering with Fulflix to offer the latest trending quality products to cement your growth.