Dropshipping is arguably one of the fastest growing businesses in the e-commerce industry today. It is a highly sought after retail service by large production and manufacturing companies with huge customer base and an extensive distribution network. This business model leverages on the efforts of producers, suppliers or other retailers to deliver customer orders directly to the consumer through the use of an ecommerce website.
The system of ecommerce trading is now being practiced all over the world, and it has its major dropshipping suppliers and fulfillment services based primarily in the United States. The Chinese market, however has experienced tremendous growth in the dropshipping and wholesale industry since its emergence in 2006, with majority of its sellers servicing both companies and individuals. It is a business for both small and big ticket items depending on where the dropshipper’s interests lies.
It is a lucrative business venture with a low barrier to entry – basically anyone with an iPad or laptop and knowledge of how to operate an ecommerce website can setup and manage it successfully. There’s minimal financial involvement by the owner, low startup cost, it is independent of location, and you enjoy the added advantage of having to keep no goods in stock.
With all these benefits it may seem that dropshipping is the ideal ecommerce business model ever conceived and may as well be every entrepreneur’s dream. This business model however isn’t risk free, dropshipping, like any other business also comes with its challenges and occasional hiccups.
The problems associated with dropshipping cut across various divides including managing multiple warehouses, keeping remote inventory up-to-date, defective item returns, among other issues and dealing with them requires expert finesse, great communication and timely decision making skills.
As a drop shipper, it is important to understand that problems will inevitably occur. Finding the right solutions to these problems and handling them expediently so that your customers actually believe you to be a regular retailer and also have no idea that you’re dropshipping, is what makes you a successful drop shipper. It would certainly make you appear amateurish and unprofessional to turn around and blame the supplier when your buyers start complaining.
To get a better understanding of the business model and its workability, we have provided examples of some of the problems you may likely encounter as a drop shipper and their respective solutions to help you resolve them effectively.
MANAGING MULTIPLE WAREHOUSES
One major problem most largescale drop shippers have to deal with is multi-warehouse management issues. Working with multiple dropship suppliers is a wise business strategy, in any case where your primary supplier disappoints, you will have other supplier to fall back on. This however means extra attention is needed in your inventory and order management process to make sure everything is in line with you and your suppliers.
This problem can be well managed by choosing dropshipping software which allows to add as many warehouses as required, and by maintaining a smooth communication channel between you and your suppliers.
REMOTE INVENTORY MANAGEMENT
Although running a dropshipping business may not require you worrying about keeping inventory, you do however need to ensure that the items kept in store are up-to-date. This is the problem of remote inventory, and how you present an item to be, every characteristic advertised on your ecommerce website must be exactly what the customer gets when he orders it.
Managing this situation effectively requires that you synchronize all dropship inventory data from your supplier’s warehouse system on a daily basis by using a cloud-based inventory platform or a dropshipping plugin which will automatically synchronize the data for you and significantly reduce any risks of manual updates. This would enable you keep proper track of items in your supplier’s warehouse and also manage customer orders more effectively.
DELAY WITH ORDER PROCESSING
When a customer places an order through your online store it is expected that the order be processed within a period of 24 hours. Nowadays, customers are used to their orders being processed promptly, so in a situation where you alert your supplier but he seems to be delaying with the order confirmation, the best way to handle the situation is to follow up with them immediately.
Following up with the supplier to know the reason for the delay and expected delivery time provides you with a reasonable answer to give the customer regarding when he should expect his order to be delivered in case he calls. It also shows that you are responsible and it will build the customer’s trust in you, especially if he is ordering for the first time.
ITEM ARRIVED DAMAGED
In a situation where a customer complains that the item you shipped to him arrived damaged you can liaise with your supplier to have the replacement part or the whole item shipped to the customer. This problem requires that you have a very strong return back policy with your supplier. You must also check to know your producer or supplier’s warranty terms and conditions.
ITEM OUT OF STOCK
This is probably the most frequent and common problem associated with dropshipping. If in any case a customer orders for an out of stock item and your supplier did not update you about the availability status of the item, then you have to take charge of the situation immediately.
This problem can be solved by having more than one supplier who might have the item in stock. If you are unable to fulfill the order, contact the customer immediately and inform him about the situation. You may even suggest alternative items to purchase. In most cases, a customer will be happy that you made the effort and may even order the alternative item you suggested from you.
WRONG QUANTITY SHIPPED
Shipping the wrong quantity of items to the seller may happen sometimes. However, if you’re proactive, you can actually stop this problem before it happens by reviewing the invoice from the supplier to verify the quantity before the item leaves the warehouse. In a situation where the item has already been shipped, then you can inform the supplier about it.
Knowing your supplier’s return back policy and keeping the process simple for the customer is vital here, it might be the difference between earning your profit and suffering a loss on that particular order. Also, if the customer has to return the item without paying anything, it would be a big plus for your business and you may end up keeping that customer for life.
ITEM SHIPPED TO WRONG ADDRESS/MIX UP OF ORDERS
When an item gets shipped to a wrong address or to an address that doesn’t exist, check immediately to see the shipping address that was sent by the customer. Also check to see if it is the same as the address you sent to the supplier. Ensure that you have the complete evidence of the shipping address you sent to the supplier. That way you will be sure whose fault it is before you agree to any costs for the reshipping fee.
The dropshipping business model is highly feasible when managed effectively. It is however important as a precautionary measure that you take note of its associated problems and their solutions before they arise.
What matters most as a drop shipper is keeping your customers happy and taking care of problems effectively without them knowing that you’re dropshipping. Whether it is managing problems associated with the remote inventory, multiple warehouses or any other, a professional drop shipper will always find a way around it and still maintain a stable relationship with his customers.