Online selling platforms provide a great opportunity to sellers to showcase quality products and to acquire a permanent clientele. Maintaining the inventory of products to be sold on these platforms is cumbersome and has a large operational cost associated with it. The sellers need to own or lease out a warehouse for the same and maintain the processes associated with multichannel inventory management.
Selling online without an inventory has been adopted by many merchants, where they market a product through product listings at selling sites at a minimal cost and earn a commission through these transactions. A synergy of product offerings from multiple vendors can be utilized by sellers to create a reputation for their merchant account at E-marketplaces. The shipping and delivery are handled by the channel on which the seller’s account is created. Sellers can sell products of their own brand through distributors. If you are a new seller, check five checkpoints before you sell products online.
This business model is being adopted by many e-commerce marketplaces like eBay, Amazon, Truegether etc. where the inventory is maintained by third-party businesses. Multiple product ranges can be sold online based on seasonal demand and profitability and various sales statistics can also be gauged to determine the correct product-mix to be stocked in warehouses. Only a minimal rental and handling fees amount has to be paid by these E-commerce giants.
The quality check and choice of vendors are done by the sellers and sold on a trust-worthy E-marketplace platform. Since quality checks are performed by fulfilment centers of the E-marketplaces, the seller can concentrate on the marketing aspects of the business.
The most common method of selling without an inventory is called Drop Shipping which is an online selling approach. In Drop Shipping sellers take orders through selling platforms like eBay, Amazon or TrueGether and redirect the shipping and delivery operations to the vendors, retailers or distributors.
Currently, Salehoo is one of the popular platforms that provides you with some of the quality drop ship suppliers.
Let’s find out some more details about drop shipping:
- In drop shipping, after receiving the payment from the customer for the order, the seller immediately places the order with the vendor through the interface available on the e-marketplace portal, all the operation status records are monitored on the portal by the E-marketplace team.
- The order is relayed to the distributor who updates the inventory after the product is shipped out.
- The E-marketplace has a quality inspection team that checks for the quality of the product being shipped.
- The logistics details are updated by the distributor at the E-marketplace system which would reflect on the customer’s account at the selling marketplace as soon as the seller receives the information from the vendor.
- The distributor sends the product with the seller’s logo and company details labelled on the consignment so that it appears as if the seller has shipped the product.
- The seller gives his/her approval to release payment to the distributor once the product is delivered successfully without returns to the end customer.
- The intermediary role is played by the selling platform where the product-listings, price adjustments, discounts, and transit status are maintained in their database.
Benefits of Drop Shipping
- Start-up companies with low investment capitals need to invest only for fees to be paid to vendors and distributors for their services.
- Cumbersome Inventory Management tasks can be outsourced to concentrate on product marketing.
- Inventory Maintenance costs can be waved off.
- Good Quality products can be obtained after quality checks are done at vendor’s and E-marketplace’s ends.
- Start-up costs are less without inventory than selling with an inventory.
- A large range of profitable products can be featured on the merchant’s account.
- Processes and their updates are managed by suppliers.
- The Personal brand endorsement can be done without much effort.
- Stock-up of unsold products and the associated costs can be avoided.
- Customer management services are handled by vendors or E-marketplace customer care.
- Sellers can obtain products that are in high demand at wholesale prices from vendors and list them at higher rates to online customers.
- The seller is given control of operations and decision-making and has access to the inventory database which can help them stay alert in case of any anomalies.
- The seller has decision-making power of deciding product discounts, vendor commission, deals etc. depending on their profit margins without having to spend on inventory.
- A permanent trustworthy bond of sellers with vendors and customers can be ensured without having to perform excessive operational tasks.
- A large number of buyers or potential customers can be targeted using marketplace services
How to Set Up Drop Shipping?
- Set up a merchant account through selling sites like eBay and Truegether.
- Search for a reputed distributor or vendor by registering on online seller group sites and do a background check on their reputation and ranking.
- Create an account with the wholesaler or supplier
Upload product details including images, descriptions, and specifications on the marketplace portal you have chosen.
- Provide price inputs considering variables like wholesaler price, wholesaler/vendor fees, shipping charges, seller credit card charges or payment processor charges, marketplace charges, discounts, returns charges etc.
- Ensure that the logistics partner of the vendors is a reputed one and they have a good shipping and handling process in place.
- Ensure that the insurance coverage service of the vendor for products during dispatch is a good one
Ensure that the payment gateway and tools are reliable and secure for both customers and sellers.
- Sellers can test product performance by doing trial sales runs and choose the best convertible mix of products to sell to their customers.
- Feedback can be obtained from customers through E-marketplace interfaces and the right buying decision from a particular vendor can be made, an alternative vendor can be chosen if the current vendor’s services are not satisfactory.
- In case the product in demand is not available, alternatives can be suggested to customers through the inventory listings of the same vendor or different vendors. However if you’re a newbie and looking sell your pre-owned stuff, you must know which products have high resale value.