Dropshipping has become a common term in the eCommerce industry - but it's a term that is frequently misunderstood, confused, and misused. Dropshipping is best described as a method of eCommerce product fulfillment where the seller doesn't keep their products in stock or on-hand, but instead has their manufacturer ship products directly to their end-customer. This lets eCommerce sellers bypass the process of storing and inventorying their products when received from their manufacturer, saving space and money on fulfillment costs. It also saves money on warehousing and freight, and can eliminate the need to hire people to manage inventory and fulfill orders. Simply put, dropshipping is when an eCommerce merchant sells goods without ever actually having their hands on the goods.
While some of the benefits and potential savings associated with a true dropshipping model are certainly enticing, there's no denying the fact that dropshipping businesses find themselves at a distinct disadvantage when it comes to trafficking consumer goods in the United States. This is in large part due to the fact that a lot of eCommerce product manufacturers are located in China, because they are often able to offer popular dropshipping products at much lower costs than manufacturers in other locales. So for the dropshipping business that does a lot of sales in the United States, their products have to travel quite a long way before reaching their end destination and their shipping costs are going to be significant - presenting two major hurdles to growing a highly profitable and successful eCommerce storefront.
The process of dropshipping involves a couple of steps - it requires a relationship with a manufacturer, running and marketing your online business, and coordinating the shipment of products to the end-consumer. As the enterprising Shopify dropshipping company makes online sales, the common dropshipping model is that their Chinese manufacturing partner ships items out one at a time to US consumers. On average, these shipments take around three weeks (!) to arrive from the moment an order is placed. And it doesn't just take a long time for the order to arrive, but these shipments usually come with incredibly high international shipping costs. Additionally, there are plenty of stories about manufacturers messing up the packaging or branding of an eCommerce merchant's products and sending out incorrect shipments.
"Dropshipped products direct from a manufacturer take an average of three weeks to reach the end-consumer."
And when it comes to building a relationship with a manufacturer, you can't just find any ol' manufacturer. In a dropshipping business you have to find a manufacturer that 1) makes the product you want, 2) offers customization options (branding is lyfe), and 3) is willing to ship products direct-to-consumer. Finding a reliable manufacturer that checks all of these boxes is no easy task - a lot of large scale manufacturers don't want to get into the direct-to-consumer business. Dropshipping involves a lot more hands-on administration by the manufacturer, and the margins in direct-to-consumer just aren't the same that they experience in their volume orders. This ultimately means that, unless you're doing incredible order volume, you just won't be a priority client to the manufacturer that is going to be handling your order fulfillment. Locking up the right manufacturer is critical to your success in a true direct dropshipping model.
While a direct dropshipping option like the one described above is how a lot of people like to dropship products these days, there are other options available for your dropshipping business that can resolve a lot of the pain points in a traditional dropshipping model.
You can boost your profit margins and cut down delivery time significantly by adding a fulfillment center partner to your dropshipping business model.
These common dropshipping issues mentioned above often lead to lost or cancelled sales due to long delivery times with no order tracking, as well as decreased profit margins due to high one-off international shipping costs. eCommerce consumers don't just like quick delivery times - they basically require them. In fact, just 15% of eCommerce consumers (who are all used to two-day shipping nowadays) say their delivery speed expectations are met. Another requirement for eCommerce consumers is low shipping prices - it's been shown that advertising free shipping entices 79% of consumer purchases in the eCommerce space. Also, when you charge for shipping, there are plenty of statistics that show your abandoned cart rate goes up significantly. On both of these fronts, the common dropshipper is taking serious losses when it comes to sales volume, profit margin, and ultimately, marketshare - especially when you consider the demands of eCommerce consumers in relation to the service level provided with a traditional dropshipping business model.
At the end of the day, the best way to optimize your dropshipping business that utilizes a foreign manufacturer is to partner with a US based fulfillment center. It's the best way to find the sweet spot between cost effectiveness and a quality customer experience. By utilizing a US fulfillment center in your dropshipping business model, you can still avoid the costs of storing and receiving freight and hiring your own team to help you fulfill orders. You also are able to cut that three week delivery time down to 2-3 days, and trust us, your customers will thank you by making additional purposes and that improved customer experience leading to more positive reviews. It's really a no-brainer if you want to grow your business and increase your profit margins. But, finding a reliable fulfillment partner that is familiar with eCommerce dropshipping business models can be tricky. And that's where PackYak comes in to save the day! Partnering with PackYak gives you access to a team of eCommerce experts and fulfillment professionals that provide instant customer support so you can always get answers fast. Also, PackYak doesn't use a one-size-fits-all approach and is proud to offer custom fulfillment solutions that work for you and your business.
Partnering with a fulfillment center like PackYak allows you to shift your dropshipping business towards purchasing larger quantities of product and having them freighted via container ship to the United States. This ultimately leads to more profits and increased sales due to the far superior service you are offering than the traditional dropshipper.The nice hidden bonus in working with a fulfillment center and ordering larger quantities of products is that you save money on the cost-per-item charge from your manufacturer when you increase your order quantities. It's a larger upfront cost, but it pays dividends in the long-term. After your products arrive in port and get trucked to PackYak’s facility, your inventory is kept safe in PackYak's secure warehouse facilities with minimal storage fees. By this point, PackYak has connected its warehouse management solution to your online storefronts, and orders are ready to be fulfilled as they come in, right from the United States with fast shipping times and low shipping costs. You can also add more custom fulfillment options with a partner like PackYak, who is happy to throw an insert in or add a sticker to an order - just send us a quick Slack message in your dedicated customer Slack channel, and it's as good as done!
The dropshipping model where you utilize a US fulfillment center will produce transit times as short as two days from the time of purchase, cutting the average three week transit times by about 90%! Furthermore, using PackYak’s negotiated shipping rates can save as much as 95% off of retail international shipping rates, which is an incredible amount of money you get to keep in your pocket. Once your dropshipping storefront partners with PackYak, you’ll find a much happier client base, less customer service problems, massive shipping savings and more repeat business! Talk to a professional Yak today and learn all about converting your dropshipping business into an eCommerce empire! Get a free fulfillment services quote today at packyak.com/quote.
That's all for this week's edition of The New Yak Times, tune in next week and subscribe below!