When to Dropship or Use a Fulfillment Center?

David Linder

David Linder

I write about dropshipping, ecommerce and marketing. Owner of www.productmafia.com the worlds best product research agency for Dropshippers.
4 min read

Dropshipping is a convenient way for startups to set up an eCommerce store and start selling products. With this business model, you don’t have to deal with physical inventory and shipping of products to your customers. You won’t be anxious about selling all your stocks because you will only pay the supplier for the products you have sold. As long as you have a laptop and internet connection, you can get started with dropshipping in no time. However, if you want to have greater control over your inventory so you can provide quality control and faster delivery to your customers, using the services of a fulfillment center is the way to go.

Most startups begin their online business by dropshipping products from suppliers due to the advantages that it offers.

Advantages:

  1. A dropshipping business only requires minimal capital to start. You won’t be spending much because you don’t need to purchase products in bulk to start selling.
  2. It is easy to manage and the risk is low. You don’t need a warehouse to store your goods in and someone will handle the packing and shipping of products for you.
  3. You can run it from any place with strong internet. Communication with suppliers and customers will still be effective.
  4. It gives you flexibility when it comes to selling products. You can easily switch products anytime you want.
  5.  You can offer a wide selection of products for your customers to choose from. Customers will not be limited to a few products only.
  6. Seamless fulfillment process because all orders will be processed on time.

Yet, just like any other businesses, dropshipping has its disadvantages too. As you will be sourcing products from suppliers, the profit margin is lower. To make a considerable profit, you have to sell more of the same products which can be challenging because other drop shippers will be selling the same products.

Another issue with dropshipping is the probability of errors on the part of the suppliers. These include low-quality packing, missing items, mishandled shipment, and delayed deliveries. All these errors will fall on you as the retailer and you have no choice but to assume the responsibility and apologize to the customers. If this will not be resolved as the customers wanted, you’d be getting negative feedback on social media and review sites about your business.

Not owning the inventory means you will rely only on the supplier to tell you the availability of products. If this is not coordinated properly there’s a chance that you’d be selling items that are already out of stock. When this happens, you’ll end up apologizing to customers and processing their refunds.

If you don’t want to continue dealing with dropshipping companies due to these inconveniences you can opt to own your inventory instead and use a fulfillment service.

Moving to a Fulfillment Service from Dropshipping

This strategy is ideal for drop shippers who have been in the industry for long and have a huge capital to buy their stocks. For beginners with limited capital, dropshipping products would be better at this stage as you are still testing the waters and wouldn’t want to commit to something you cannot sustain financially. When it is the right time to own your inventory as a way of scaling your business, you will gain the following benefits:

You’ll have control of your inventory.

By purchasing and owning the products you sell, you’ll be able to know exactly how much goods you have in stock. When you have this information, you can avoid selling products that are out of stock.

You can bring your products closer to your customers.

Consumers demand the quickest delivery of their purchases. If you’re selling to US consumers, hiring a fulfillment center within the country to reduce your shipping time would be a smart move for you. You’ll also be able to provide reliable information about the status of delivery than having the supplier ship them for you.

You’ll have better margins than partnering with dropshipping suppliers.

Buying your products in bulk, up front will give you more freedom to price them as you want and earn high profits. You will not be pressured to have recurring sales just to get an ROI. Another benefit of buying wholesale from suppliers is the possibility of getting better pricing as you will take care of the storing and shipping yourself.

If you’re already at the stage where you think that purchasing your stock and using a fulfillment service will be better for you, make sure that you’ll buy only winning products on wholesale. Don’t make the mistake of stocking up on products that nobody wants to buy. You can start by assessing which products that you currently drop ship are getting more sales. If these are seasonal products or products that will go out of trend after some time, find other products that you can sell for a long time. This way you will not end up with a large inventory when there will no longer be a demand for the seasonal product.

Final Thoughts

Look for products with lots of potentials by researching dropshipping products and competitors. You can do it yourself or take the quickest route of getting access to data-driven product research by subscribing to Product Mafia. As winning products are curated daily with analytics and supplier info, this cuts out the time of the research process and take you closer to finding the best dropshipping products to buy upfront in bulk or drop ship without inventory.

 

 

Further readings:

8 Essential Skills For A Successful Dropshipping Business

How to be Successful with Dropshipping

How to Negotiate with Dropshipping Suppliers the Right Way

David Linder

David Linder

I write about dropshipping, ecommerce and marketing. Owner of www.productmafia.com the worlds best product research agency for Dropshippers.

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