Dropshipping or own inventory?

Hey, if you think that the answer is pretty straightforward, you might want to read this post 🙂

It all depends on your vision and resources. I still think that ‘Dream big or go home‘ is a golden rule, however it is also good to be sensible and patient, especially if you are not an experienced investor just yet. And another rule I love and is applicable here is ‘Give yourself time‘.

First of all – what does dropshipping mean?

If you have your own webshop and your customer places an order, you process it for them and send their order to the supplier for fulfilment (it can be automated). Your supplier is like an external warehouse that you send your shipping request to. That means that you are the ‘middle man’ – you do not pre-purchase your items to keep your stock, you don’t pack and ship them – all of that burden is transferred to the supplier, including the costs this normally incurs. Your portfolio can be wider. Sounds great if you do not want to invest too much to begin with. Your cost would be to set up your ecommerce platform (more about ecommerce can be found here). So more money stays in your pocket and you don’t risk much.

Apart from… your reputation

You have almost no control over order fulfilment. That is why it is important to find a reliable supplier and worth finding out about their shipping/returns/complaints policies. For those stores, that handle order fulfilment in house, it is much easier to solve the problem with delivery. Not so easy for you though. It is also worth having clear rules regarding returns/complaints etc. stated on your website. When it comes to complaints, you MUST be their first point of contact if you care about your reputation. Being a middle man can actually be a hard job – you have to be nice to the customer and give them reassurance they need even if you know it will take longer than expected and in the same time you have to make sure that the supplier does everything they can to remedy the situation.

Unhappy customer is way more likely to speak up and ruin your reputation – so it has to be handled in a delicate manner

Well, if it happens that someone posts on social media to tell the world how unhappy they are with the service – it is not the end of the world. But best practice is to ALWAYS follow up. The customer that receives a bit of a TLC to mitigate their bad experience is quite often happy to give you good feedback afterwards. Never underestimate the power of your online reputation.

The other thing I will just touch upon for your awareness is your branding. If you outsource that part of your ecommerce activity, you may end up with products being shipped in a dull, bleek packaging with no personal touch whatsoever. Some suppliers offer to use your branded tapes or boxes, they can also not put their own marketing materials in it for your branding’s benefit. But it does not come in a package by default. So if you are not too worried about your brand, you can just skip this and leave as it is. Otherwise….

If you ‘dream big’ from the first moment and you have recources

You can hold your own stock. You have to have a space, money to purchase products, your portfolio might not be too extensive. You are responsible for the whole process from beginning to end. You can personalize your deliveries, make sure they leave the house on time and get delivered in a timely manner. If there are any special requests – your job is to make sure they are taken care of.

So you are the one making your customer’s experience seemless

Plus the margins. But we can talk about them another time. If you are the one-band-man in your business, doing everything on your own – this will surely become your full-time job (sometimes 24h will not be enough – trust me!).

The other option is to combine both – you can hold some stock of fastest moving parts in-house

…if you know them, the rest you can order from your outsourced warehouse. Whether or not this solution is worth implementing probably depends on the nature and the scale of your business and the costs of shipping from different locations you want to transfer to your customer or are able to swallow. I have experience in all three areas in the globally trading company and know pros and cons of each but it is also inevitable in the business I work for in my 9-5 job. If you would like to know more about it, I am here to answer questions 🙂