How to Run a Drop shipping Business
Has your recent attempt to start your own drop shipping business run into more complications than you originally expected?
Although on the surface it may seem simple, we understand that there are numerous problems that may arise that can make drop shipping seem even more difficult than running a regular store.
You may have had to deal with inventory syncing issues, relations with your suppliers or mistakes made by your suppliers. You also will have to decide your own shipping policies, manage returns and keep good relationships with the key of your business, your customers.
With our experience, we can give you our advice on how to best manage these issues that arise while running your dropshipping business.
Image from Ordoro
Inventory and Stock Management
Managing your inventory among numerous different suppliers and dealing with multiple customers can be a challenging task. Ignoring either side could lead to you having a lack of great brands or a lack of customers, both problems you need to avoid in order to run a successful dropshipping company. There are a number of ways through which you can best manage your inventory.
1. Using an Inventory Management Application
Inventory management can now be automated, so it’s easy to find and manage multiple suppliers willing to drop ship on a singular platform.
Software like Modalyst automatically adds products from suppliers and syncs their inventory with your e-commerce software, so you never need to worry about selling a product that is out of stock.
Additionally, since you will be managing multiple suppliers you reduce the risk of having just a few suppliers that may churn or have bad shipping/returns records.
2. Communicate with your Drop shipping Suppliers
If you notice that a bestseller on your store is running out of stock it might be a good idea to let the supplier know that his product is doing very well in your store and ask whether he plans to continue to produce it.
This will help you communicate with your customers when the product is out of stock over whether they can expect it to return soon, or if they would like to pre-order it when it returns. Additionally, communication regarding changing stock is important as you can anticipate potential issues that may arise with particular products you stock.
Platforms like Modalyst streamline the communication process so you can message your suppliers from the platform itself, helping you stay organized and in touch whenever you need to.
Maintaining Supplier Relationships
A drop shipping Retailer without drop shipping Suppliers cannot exist!
Hence it is of paramount importance that you maintain a good professional relationship with your Suppliers to have a consistent flow of quality products with the least possible complications for your customers. You can assure this in many ways:
1. Give them the freedom to choose shipping and returns policy
Since your suppliers are the ones who have to deal with paying shipping costs and packaging your goods you should allow them the freedom to choose how much they wish to charge for shipping, and what conditions they have for returning items. If certain suppliers’ policy doesn’t suit your store you might be better off looking for suppliers that more accurately reflect the policies you want in your store.
2. Run Co-branded Marketing campaigns
You can maintain good supplier relations by running co-branded marketing campaigns together.
This includes social media shoutouts, blog posts, or even exclusive product releases. This can help both of you increase exposure, as well as receive awesome exclusive products from your Supplier.
An interesting example of this in action was the campaign run by Alexander Wang and H&M. H&M was able to offer exclusive branded items for a limited time, and Alexander Wang was able market himself to a whole new generation and market.
Sometimes brands with different images make great matches!
3. Ask them for samples if you run a physical store
If you dropship and run your own store, sometimes maintaining good relationships with suppliers who drop ship with you can allow you to stock a few sample items from their collection to your physical store!
Not only will this give you a new range of products, but you will be able to test how well they sell, and as a result provide your supplier with useful insights about their products!
4. Use a marketplace platform with standardized policies
Joining a marketplace with standardized policies can help you solve the challenges associated with supplier relations while allowing for better communication between the two. On a marketplace like Modalyst, shipping rates are always decided by the supplier, you have a standardized 40% revenue share per sale, there is a suggested two week return policy, there is a dedicated inbox through which you can communicate with your suppliers and we send out newsletters with the latest product releases from suppliers so you can pick up the latest products instantly.
Dealing with Supplier Mistakes
Let’s face it, nobody is perfect and everybody makes mistakes.
When your suppliers are swarmed with orders, there are many potential problems. They might ship the wrong item to your customer, the item may be defective, or worse, they might not ship anything at all! In these situations, it is your duty to take responsibility to make sure your customer remains satisfied.
Shopify has a fantastic three step process about what to do when problems like this occur.
1. Own the Mistake
When explaining the error to your customer don’t ever try to blame the dropshipper even if it was their fault.
It makes you look unprofessional and will confuse your customer even more. Your best bet is to apologize for the mistake, and let your customer know how you plan on fixing the issue.
2. Make it up to them
The best e-commerce companies tend to go above and beyond what is required of them. Depending on how bad the mistake was, you can offer your customer a range of things, from discounts, free shipping, or even a complete refund.
3. Make the Supplier Pay for the mistake
Although you have to own the mistake to the customer, you don’t have to be the one paying for it.
If your supplier was the one who made the mistake, make sure they pay for the general aspects of the mistake (shipping and return fees etc). They probably won’t pay for any additional freebies you offer your customer however.
As long as your supplier is honest and reputed, he will definitely offer to fix his mistake and if not, you should consider looking elsewhere.
4. Be wary of which Suppliers you use
Even the best suppliers will make mistakes, however, you should still look out for those suppliers that might scam you and your customer.
Sometimes joining a drop shipping marketplace can reduce these risks greatly, as suppliers must pay to be members, and are required to provide specific imagery and descriptions for each item.
Additionally, since these marketplaces are actively managed, any suppliers that intend to scam and have slipped through the cracks are simply removed by management so your risk is greatly reduced.
Choosing a Shipping and Returns Policy
Choosing a shipping policy can be tricky because you would need to create a unique shipping policy for your store, while managing the shipping policies of all of your suppliers.
It goes without saying that customers are the most important aspect of your drop shipping business.
Therefore you have to make sure you build strong relationships with your customers as well as assistance whenever needed.
1. Create an organized and responsive ticketing system
Make sure to respond to your users within a few hours and send messages that are professional, friendly and conclusive.
Be ready for many all kinds of e-mails, from friendly to not so friendly, and be prepared to respond to them appropriately.
2. Check-in with your regular customers
Customer retention is very important. Every now and then, check in with customers that purchase from your website often through e-mail, maybe offering promotions or discounts or asking them for their suggestions or opinions. You can use this customer feedback to adjust your website based on your most loyal customers, which should help sales immensely
3. If you can, offer phone support
The best E-Commerce stores go above and beyond for their customers.
Being able to talk to them on the phone would be a great and personal way to improve your relationship with your customers because it increases their trust in your brand.
We hope reading this will help you in your journey to running your own drop shipping company.
While the experience might be difficult, we promise it is very rewarding as long as you put in the time and effort. Stay tuned next week, where we discuss the best ways to market your new drop shipping store!