In order to run an online store successfully there are many factors that have to come together, such as choosing a profitable niche product, building a well-designed website or storefront, and finding ways to bring in the kind of traffic that will convert into buyers.
But any experienced online retailer will tell you that a lot of the work really begins after an order has already been placed.
If the order doesn’t reach the customer on time, is poorly packaged, dirty, or damaged, then it can lead to unwanted headaches and additional expenses that can wreak havoc on your profit margins.
The bottom line is: the success and profitability of your online store hinges on your chosen order fulfillment and distribution model.
Drop-Shipping Versus Order Fulfillment Services: Which is Right for Your Online Store?
If you are just starting out with your online store, then typically the most cost-effective way to get the products you’re trying to sell is to buy them directly from a wholeseller in the industry you’re targeting. Once you have decided to go this route, you then have two options: you can try your hand at drop-shipping, or you can purchase the items and store them yourself with a well-placed order fulfillment and distribution provider and then ship them to customers as orders are received. Both methods have their pros and cons.
With the drop-shipping model, you forward your customer’s order and shipping information to your wholesaler. The wholesaler then locates the item, boxes it up, and ships it to your customer (with your business’s name on the box). Your business is then charged you for the item. You, in turn, charge your customer and pass along the tracking information.
There are many obvious benefits to relying on a drop shipping model:
- You don’t have to tie up large sums of capital in unused inventory.
- You only buy inventory when you need it.
- You don’t have to pay for or manage a warehouse and/or shipping and fulfillment.
- Your overall risk is relatively low.
- You can run your business from anywhere.
There are several down-sides to drop-shipping, however. The two biggest cons are lower profit margins due to drop-shipping processing fees and less control over order fulfillment and distribution quality.
In some cases, it just may make financial sense to stock and fulfill your own products via an order fulfillment and distribution provider.
In this case, because you own the inventory, you may be able to take advantage of bulk purchasing discounts. And should you need to liquidate any surplus inventory, you can always use online inventory liquidation.
It is also a cost effective way of offsetting expenses such as maintaining your own warehouse and staff, and paying for packaging supplies, as well as an assortment of warehousing technology and equipment. It is a benefit to companies that do not want the hassle of managing the entire receiving, packaging, and shipping process.
Moreover, order fulfillment and distribution providers typically are able to pass through a substantial shipping discount, because of the volume of packages that they ship on a daily basis. Lastly, in this setup you’ll have a bit more control over the order fulfillment processing, distribution quality, and customized packaging (learn more about custom box printing). But, you will still need to do your homework to make sure that your order fulfillment service provider is a good fit for your business.
Tips for Locating the Best Drop-Shippers and Order Fulfillment Providers
There are several common features great drop-shippers and order fulfillment providers share. If you actively look for these qualities, then you’ll have an easier time identifying the best service providers:
What technology do they use? The best suppliers will invest significantly in the systems they rely on and the technology behind it all. Automation, efficiency and scalability are really important, especially as you grow your business. Having a supplier with solid systems in place will reduce the number of processing errors, make ordering easier and allow you to stay on top of inventory shortages.
How good is their customer service? Does the company provide dedicated, knowledgeable service representatives or do you just get passed around from one department to the other like a hot potato? Having access to sales representatives who know the industry inside and out is a huge plus. This is especially important early on when you are new to a niche, and you’re going to have many more questions.
Where are they located? Where is your customer-base located? If your drop-shipper or order fulfillment supplier and distributor is too far away from them, then it will cost you more in shipping and extend the delivery time.
Pick-up times. Most online stores provide immediate fulfillment and on-line shopping is increasingly expected to come as close as possible to this, by offering short delivery lead times. This could perhaps be next day, or in some cases, even same day.
Warehouses with late pick-up times are great because it allows your customers to place an order in the early afternoon that can still ship the same day. If shipments only go out at 11am or 12pm, then it will mean longer shipping times for your customers.
Bottom line: whichever route you decide to go, it definitely pays to invest some time and effort getting the best service providers. The success of your online store depends on it!