Many e-commerce businesses start off with drop shipping because of the perceived ease and cost-effectiveness of the business model. However, with increased competition across niches as well as expedited and two-day shipping methods becoming the norm, drop shipping models face challenges in today’s online marketplace.
So, is the drop shipping model still viable in 2018?
Drop shipping can still be an effective way to start an e-business because the inventory, packing, and shipping functions are outsourced. Instead of managing your own product in a warehouse that you have to pay for, you never see or touch the products you’re selling.
If your e-commerce venture includes selling makeup from home, for example, drop shipping will free you from keeping an inventory or taking care of shipping. This type of e-business can be profitable after completing an analysis to see how much you make on each product after your supplier and shipping costs.
Amazon and other companies have helped change customer shipping expectations, thanks to their now completely built-out logistics infrastructures. As a result, customer expectations are now higher than ever when it comes to shipping times.
Meanwhile, slow shipping times continue to plague drop shipping. If an e-retailer sources their product from Europe or Asia for example, customers could end up waiting upwards of 20 to 30 days before they receive their order. This can be a significant deterrent for customers and cause them to look elsewhere.
Communication is the best way to get around long shipping times. If you can set expectations regarding your shipping times, it will lead to fewer customer issues. According to Drop Ship News, providing a dedicated page with your shipping policy details and listing everything there is to know about your shipping helps soothe customers in this regard. Don’t try to hide anything, explain products will take up to 28 days to arrive. Also mention that with some orders, the products may arrive separately at different times.
The Cost to Drop Ship
Yes, you can begin to drop ship your products for low fees that can result in considerable savings versus having control over your own shipping and inventory operations. Unfortunately, the costs to continue drop shipping can increase once your business expands, especially if your supplier is a virtual drop shipper.
Drop shippers who do not own any inventory are what the industry calls virtual drop shippers. Since they are buying at slightly more than the actual wholesale cost, they often charge more for wholesale and add a margin on their price.
Virtual shippers also markup shipping costs, which can severely impact profit margins if you offer free shipping to your customers. Since these virtual drop shippers move a high volume of shipments, they get discounts on shipping but rarely pass those savings back to the e-retailers. Once you take a look at the details and add everything up, there isn’t as much room to make a profit as previously thought.
Also Read : List of Top Shopping Websites in 2018
Is Drop Shipping Still Profitable?
Still though, drop shipping can be profitable in 2018, if you can manage the expectations of your customers and count on your suppliers to perform efficiently. When you also avoid virtual drop shippers, there will be no extra costs coming out of your pockets.
At this point, you can see how asking a question like: “is the drop shipping model still viable in 2018?” can quickly get hairy. Without any sort of effort to set expectations for your customer base, then drop shipping can cost you customers and dollars. While the drop shipping model is still feasible, it’s important to watch out for the pitfalls that can make drop shipping wholly ineffective.