Drop Shipping Meaning
Drop shipping meaning: what is it and is it a suitable model for your business?
When a seller relies on a third party to handle fulfillment, the service provided is drop shipping. If the manufacturer or retailer does not have proper storage or staff to handle the packing and shipping process on its premises, outsourcing drop shipping services to a business that specializes in it can offer a more tangible solution.
How Does Drop Shipping Work?
Amazon acts as the drop shipper for many of its vendors who ship their products to retail giant for storage in their warehouse. When the order is received, Amazon’s team receives the pick ticket, packs the box, and sends the order out to the customer. The drop shipper will also receive, and process returns.
Many businesses do, in fact, handle the fulfillment process the same way Amazon does. The amount of space required for storage alone can be a challenge for business located in cities and facilities where the square footage does not permit for proper storage of products, either due to lack of space or special storage conditions such as climate.
But drop shipping also allows businesses to earn money on sales for products they don’t produce. If they process orders and collect commission as an affiliate, they are only responsible for collecting payment and providing the sales order to a third-party provider who may also be the manufacturer.
A vendor may also choose a drop shipper when testing out a new product to determine performance before expanding warehouse space or taking on fulfillment under a single umbrella. The drop shipper can also stand in to fulfill seasonal overflow.
From the seller’s perspective, the more profitable side of the business is the ecommerce end whereas fulfillment requires a great deal of space and little profit for the amount of effort and overhead it entails. If the drop shipper fulfills orders for multiple businesses, he or she has the advantage of negotiating bulk rates with shipping carriers, lowering costs to ship over the rates offered directly from those same carriers. And if shipping to the customer occurs from a warehouse logistically closer to the customer’s location, costs can be reduced further.
If you drop ship inventory, you can lower shipping costs, but sometimes you have to weigh those savings when you sacrifice communication or customer service.
Smooth Inventory Processing from Any Location
SOS Inventory makes it easy to integrate a drop shipper into your inventory system. SOS joins information from every location, including your drop shipping site, providing every user the same data to process his or her end of the workflow in the system. Once the product is shipped, the invoice can be generated and sent directly to your connected QuickBooks Online account.
Working with a drop shipper can slow communications in relaying updates from the customer to the vendor. When working with a single system like SOS that updates orders, processes invoices, and returns and tracks products every step of the journey, information is always timely and maintaining quality and good customer service is always within reach.
What does drop ship mean for your business? With the right tools for good communication in place, it could mean a boon to sales and business growth.
Perhaps you’ve hesitated because you want to maintain control of costs and communication. If adding drop shipping means puts growth within reach for your business, SOS Inventory offers the ideal inventory solution for your business.