6 Questions to Ask Your Drop Shipper
According to the eCommerce Drop Shipping Standards, the number of retailers deploying drop shipping to improve their operations and offer more products to customers is growing. As many as 33 percent of retailers currently have drop shipping partnerships, and that figure is always growing. However, choosing the right drop shipper can be an immense challenge, simply because merchants have so many options available to them. Here are six questions sellers should pose to all potential drop shipper candidates to determine which one is optimal for their needs:
1. Are their products made to order?
If vendors manufacture the products themselves, this is a critical question to ask. If the answer is “yes,” that means they have virtually unlimited inventory at any given moment, which could be a vital factor for retailers that deal with high order volumes or prefer to only use a limited number of drop shippers.
Inventory on-hand is an important consideration.2. What are the lead times?
How quickly does it take drop shippers to get inventory in stock? Because drop shippers operate in bulk in an effort to maximize their profit margin, many prefer to wait until they are out of stock on multiple items before making a single large purchase. While this practice does often result in better prices for retailers and their customers, it can lead to issues with stock outages. If a drop shipper runs out of product and is not going to receive a new shipment for a month, that is a lot of downtime that retailers will need to work around.
3. How accurate is their data?
This may seem like a no-brainer, but it’s actually an issue that many merchants realize after they have signed contracts. Inventory tracking is seldom perfect, but drop shippers do need to be highly accurate with their inventory tracking process. Up-to-date and automated inventory tracking solutions can go a long way in this regard, but not all drop shippers will have the most modern tools in play to do so.
Accurate inventory tracking is important for a number of reasons. First and foremost, inaccurate data can lead to merchants routing orders to drop shippers that cannot fulfill, which creates problems with speed of delivery and creates a customer service issue that merchants must address. It can also result in problems with reliability – how can a retailer trust a drop shipper if they cannot keep track of their inventory counts? Merchants should never assume drop shippers have accurate and automated back-office tools in play; it is always worth it to ask about their accuracy and data-handling processes.
4. Do vendors sell wholesale?
If vendors let customers purchase as much stock as they want at any given time, retailers will run into problems with availability. Imagine if a wholesaler decides to buy a chunk of inventory from a drop shipper – all of a sudden, their shelves that were stocked at the beginning of the day can be tapped out in a matter of hours.
For some retailers, this may not be a huge problem, they may offer the same item from their own stock or could use another retailer. However, if they are relying on one drop shipper for a particular item, and that item is popular among their customers, this kind of volatility can lead to some issues with serving their own customers.
If drop shippers work with Wal-mart, that could result in stock issues.5. How many retailers do drop shippers work with? And who are they?
Piggybacking off the previous question, it is important to get an idea of which merchants drop shippers work with. If drop shippers only work with smaller merchants, retailers do not have much to worry about. But what if they have a big contract with a merchant the size of Wal-mart or Target? This could easily wipe them out of stock in a single afternoon or even a single order.
6. Do drop shippers sell directly to customers?
As any retailer knows, selling directly to customers makes for the best profit margin. If drop shippers do sell directly to customers, retailers’ orders may wind up playing second fiddle because they make the drop shipper less money. Also, it could lead to more competition in getting their orders fulfilled and result in longer turnaround times. While this will be okay in many instances, it is still something retailers must keep track of and may even want to include this in their logic to determine which drop shipper receives the order.