Drop the Costs With Drop Shipping : Under30CEO Drop the Costs With Drop Shipping : Under30CEO
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Drop the Costs With Drop Shipping

| July 12, 2011 | 7 Comments

When starting any new business, a common problem is inventory.  How many units do I buy?  Where do I store them?  And most importantly what do I buy?

These questions can be troublesome, confusing, and wind up costing you a lot of money.  Fortunately for business owners there is one magic word that can ease all your pain, drop shipping

What is Drop Shipping?

Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead, transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the seller.

Why Drop Shipping?

Drop shipping has many obvious advantages to a retailer, most importantly cost.  Starting a new business can be expensive, but add in the costs of purchasing up front inventory, a storage facility, and warehouse personnel, the start-up costs goes from expensive to astronomical.  It is not necessary to incur the huge overhead costs associated with managing a warehouse full of products.  The drop ship model is the ideal solution for e-commerce business, especially when you offer many product SKU’s.  Utilizing this management technique benefits both the consumer and the retailer.  The consumer is able to browse through countless products and options in order to satisfy their personal tastes and the retailer is able to increase their sales due to a larger selection – a win, win situation.

How Do I Get Started?

I worked in a retail kitchen and bathroom showroom prior to starting my own business, so over the years I established relationships with manufacturers who sold bathroom and kitchen cabinets.  I used these existing relationships to set up meetings to discuss the drop ship business model and establish a working relationship with my company.

It may be difficult for a company with no prior sales to get a willing drop shipper.  Manufacturers don’t want to work with an unproven commodity that does not have an existing distribution channel.

If you don’t have prior relationships with manufacturers that you can leverage, utilize the power of the Internet!  The internet is an unending wealth of knowledge for new business owners.  There are excellent websites that allow companies to connect with manufacturers of many different types of products.  Doba and Alibaba are two of the most reputable websites on the Internet in the drop shipping industry.

Take Care of Your Customer

Make sure you work out an efficient logistic plan with the manufacturer that addresses common issues that will arise during shipments (e.g. damages, missing items, returns) It is imperative these procedures are ironed out before selling products in order to ensure a streamlined process that will service customers in need.  For E-Commerce, list your policies and procedures clearly on the websites FAQ.  Take care of your customer’s concerns and they will reward you with their purchases.

Anthony Saladino is Co-Founder and CEO of Kitchen Cabinet Kings, a leading distributor of quality bathroom and kitchen cabinets on the Internet.  Anthony is a member of The Young Entrepreneur Council, a nonprofit organization that provides young entrepreneurs with access to tools, mentorship, community and educational resources that support each stage of their business’s development and growth.  Connect to Anthony via Twitter @cabinetkings.

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Category: Startup Advice

  • Ryan Donovan

    Nicely written piece.  Entrepreneurship is only a few small steps away…

  • Anonymous

    Drop-shipping, while cost effective, can be VERY dangerous with regards to quality control and brand management.  If retail is a core competency, think closely before going to dropship.

    Zappos, famously, tried drop-shipping and then dropped it after poor quality and customer experience.

  • http://www.online-business-virtual-assistant.com/ Virtual Business Assistant

     Great post. I feel this could be more useful for eBay or Amazon seller who can go for drop shipping who are dealing with bulk orders. Thanks for the share.

  • http://www.facebook.com/people/Anthony-Saladino/1642191959 Anthony Saladino

    @marcbrodeur:disqus I respect your feedback and agree drop shipping will not work for every business model.  It is imperative that the carrier companies used for drop shipping are organizations that take pride in their business and will handle your deliveries with professionalism.  

  • Pingback: Drop Shipping « Procurement Mentality 101

  • http://www.scm-operations.com Supply Chain Guy

    Drop shipping can help reducing supply chain cost but it comes with tax implication. For example, if your office is in NY and the manufacturer is in MD, what’s the tax rate for your customer in MD?

  • http://www.scm-operations.com Supply Chain Guy

    Drop shipping can help reducing supply chain cost but it comes with tax implication. For example, if your office is in NY and the manufacturer is in MD, what’s the tax rate for your customer in MD?