How to Become a Better Drop Ship Supplier
Drop shipping has seen exponential growth in recent years. According to Grand View Research, the global drop shipping market was valued at $149.4 billion in 2020, and it’s expected to grow to $557.9 billion by 2025. That’s a compound annual growth rate (CAGR) of 28.8%, which is huge.
What does that mean to you as a manufacturer or wholesale distributor? Well, you have an opportunity to add or increase drop shipping capabilities and tap into more revenue now and into the foreseeable future. If you can master direct-to-consumer shipments, you could become a go-to supplier for the proliferating community of online drop shippers.
Drop shipping has roots in the mail order business models of the 60’s and 70’s. Back then, stores like J.C. Penney and Sears built huge fulfilment centers and modified their shipping processes to send out individual orders. Other catalogue services would list these products as well and simply have the fulfilment centers send products directly to their customers.
Drop shipping as we know it today evolved in 2010, when AliExpress came on the scene and enabled online retailers from anywhere to sell products directly from Chinese warehouses. That decade saw the rise of Shopify and Oberlo as well, which made the process of becoming a drop shipper even easier.
Today, there are thousands of blogs, webinars, eBooks, and courses on how to become a drop shipper. It seems like everyone and their mother is getting into the game. What’s harder is being an actual supplier for those drop shippers. But if you can crack the code, it can become a reliable source of revenue for your business.
In this article, we’ll talk about benefits and challenges of being a drop ship supplier as well as some tips for success in the business.
Benefits of Being a Drop Ship Supplier
When you supply products for drop shippers, you’re taking advantage of all the work they’ve done to market products and build an audience online. Then you step in and fulfill the sale. Of course, that’s exactly what the drop shipper wants: someone else to handle order fulfillment. So, it’s a win for everyone.
Being a drop ship supplier also allows you to:
- Work with well-known retail brands
- Expand your brand into new markets and reach different customers
- Insulate your business from fluctuations in demand
- Get broader insights into consumer desires and product performance
Since you keep inventory in your warehouse until you receive an order, you don’t need to worry about losing sales from inventory stuck on shelves in areas where demand is low. Instead, you can deliver products to customers no matter which online channel they buy from, thereby maximizing product performance while minimizing costly excess inventory. That makes it easier to sell larger, more expensive items, or those that may appeal to very specific audiences. You also don’t have to concern yourself with marketing, advertising, and other sales methods, which is a huge cost savings.
Challenges and Solutions for Supplying Drop Shippers
If you’re thinking about adding drop ship supply to your sales mix, you should be prepared to adopt some new processes. I won’t tell you that becoming a drop ship supplier is easy, but it’s certainly doable and can be rewarding. Here are a few common drop ship challenges, along with tips for drop shipping success.
Challenge #1: Shifting to Small Parcel Shipping
One of the main challenges is that you’ll be responsible for shipping out individual orders directly to customers. While you normally think in terms of carton, pallet, and truck organization, you’ll need to master consumer shipping options that make both the drop shipper and end user happy. This means picking, packing, and shipping orders in as little as a few hours and sending them through a variety of carriers.
Also, it’s not as if you simply have more of the same boxes going out. Labels, packaging, and purchase orders need to match the brand the customer ordered from. This may require different custom packaging and printed logos for each drop shipper. Remember, the end customer may not know your warehouse had anything to do with the sale.
Thankfully, you don’t have to manage shipping procedures manually. Multi-carrier shipping software can detangle the web of drop shipper requirements and carrier availability to get each product to its destination on time. The right software lets you:
- Pack more accurately in less time
- Print compliant labels almost instantly
- Auto-fill key fields to eliminate manual data entry
- Automatically verify parcel contents to keep customers happy
Challenge #2: Bigger Order Volume
Since drop ship orders are individualized in your system, your staff will need to keep track of many more purchase orders, shipping confirmations, pick tickets, and possible returns than before. More paperwork of course leaves more room for human error, so it’s a good idea to automate as much of the process as you can.
An electronic data interchange (EDI) solution can eliminate hours of work and allow information to flow seamlessly between the customer, the drop shipper, and your business systems. EDI can:
- Receive new orders and jumpstart the fulfillment process
- Turn around Advance Shipping Notices, which drop shippers use to tell consumers about delivery dates
- Reduce error-driven returns and chargebacks, increasing your vendor scorecard rating
- Ensure ongoing compliance with each partner’s supplier mandates
Challenge #3: Finding the Right etail Partners
Not all drop shippers are reputable or experienced. To find the better partners, you can set qualifications like a certain number of sales per month or number of customers. As with any retail partner, you need to feel confident that the drop shipper has a legitimate business that will bring positive results to your organization. The last thing you want to do is waste time onboarding a drop shipper who won’t end up selling any of your products.
Spend some time researching each prospective drop shipper who you could work with. Check out their online store or seller profile, look at their social following, and see what customers say about their service. A bad drop shipper will disappoint customers with after-sales service no matter how well you do your job. If you sell popular products, pay even more attention to the drop shippers who want to work with you, as there are always those who just want to make a quick buck and don’t care about the customer.
Challenge #4: Getting the Software Right
Becoming a drop ship supplier can increase the number of data points you work with exponentially. You’ll have documentation for every customer and order. If you do things manually, like copy invoices from one program into another, not only will your office staff need carpel tunnel treatment, but errors and redundant work will stop your growth in its tracks.
Instead, why not invest in integrated technology that eliminates manual processes, while boosting internal efficiencies and your brand visibility. For example:
- ERP integrations exchange data between your sales channels, business system, and fulfillment channels for faster, more accurate deliveries
- Product information management (PIM) software allows you to keep your product descriptions synced up and current across channels, which also saves time and money.
- Integrated analytics can help you keep an eye on drop ship processes, and identify areas for improvement to keep your vendor scorecard ratings high
- Cloud-based EDI makes it easy to manage supply chain operations from anywhere, while connecting you to retail partners, carriers, and 3PLs for faster order fulfillment
Advance Your Drop Ship Supplier Strategy
With the drop ship industry set to more than triple in the next five years, developing as a drop ship supplier can be a smart strategy. To take advantage of that opportunity, it’s important to run your operation with the right tools.
TrueCommerce is a unified commerce ecosystem that includes everything from EDI to order management and more. Get in touch with a specialist to learn how we can help you gain an edge as a supplier in the drop shipping industry.
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About the Author: Josh Wayne is Vice President of Commerce Products at TrueCommerce and a supply chain expert with 17 years of experience developing integrations for shipping & fulfillment, eCommerce, EDI, and more. Today, he oversees Product and North American eLearning for our eCommerce platform, storefront integrations, and multi-carrier shipping software. Josh lives in Columbus, OH, and in his spare time he is an active volunteer with the Boy Scouts of America. When not at work or volunteering, you can find him out on his Harley or in the woods hiking and camping.