What Are The Advantages And Drawbacks Of Drop Shipping in 2018
What Is Drop Shipping?
The simple definition of drop shipping: A form of order fulfillment in which you purchase individual products from a wholesaler and have them shipped directly to the customer who ordered it.
Drop shipping stands in contrast to conventional retailing, in which you purchase inventory in advance and store it until customers order it. With drop shipping, you only contact your supplier once you’ve received an order and let them handle fulfillment. Products are shipped directly from the supplier to the end customer, and you are charged only for products as they are purchased.
How Do I Find Drop Shipping Suppliers?
You can either contact individual suppliers about their drop shipping capabilities or consult a supplier directory, e.g. World Wide Brands. You can get more drop shipping supplier information by clicking here.
What Advantages Does Drop Shipping Offer?
There are several significant advantages offered by the drop shipping model:
* Lower Upfront Investment: Drop shipping frees you from the need to invest thousands of dollars in building and maintaining an inventory. You don’t need to purchase products until you have orders to fill.
* Wider Selection: You can offer customers a broader and more diverse product selection when you’re freed from the need to pre-purchase every item you sell.
* Less Risk: Drop shopping makes online retail a safer financial proposition for entrepreneurs. Without maintaining an expensive inventory, you don’t have to worry about selling off unwanted inventory if you close your online store.
* Global Reach: Without being tied down to a physical warehouse or having to handle your own fulfillment, you can run a business from virtually anywhere you can access the internet thanks to drop shipping.
* Scalability: Because fulfillment is the major stumbling block to scaling a retail business and drop shipping takes care of that for you, it’s relatively hassle-free to scale up from selling to a handful of customers to serving thousands.
What Are The Potential Drawbacks Of Drop Shipping?
* Market Competition: Because anyone can take advantage of the possibilities of drop shipping, competition for selling drop shippable products is fierce.
* Low Profit Margins: As a necessary consequence of increased competition, there is a sharp limit on how much profit you can take on each product. Reduced profits can make it difficult to grow your business and advertise aggressively, especially when you’re starting out.
Can A Drop Shipping Model Still Be Profitable in 2018?
I myself relied on drop shipping when I went into business for myself, and today my company is worth seven figures. Make no mistake: You can definitely use drop shipping as the foundation of a thriving, wealth-generating business. It’s fair to mention, though, that I did this in 2008.
The drop shipping world – and eCommerce in general – has gotten a lot more competitive since then. You need to have a unique, compelling proposition in order to succeed. While it is possible to do this under a drop shopping model, selling someone else’s product does make it more challenging.
There are three situations that can help a drop shipping business thrive:
1) When your products deliver huge informational value.
2) When you can sell accessories with a higher profit margin.
3) When you use drop shipping to supplement a store selling more proprietary items.
Where Are Drop Shipped Products Sold?
Drop shipping can be found on virtually every eCommerce platform. Drop shipping is responsible for a lot of business on big eCommerce sites like Amazon and eBay, and its share of the market actually increases on smaller sites.
Drop shipping isn’t just for entrepreneurs, either. Major retailers, such as Home Depot and Sears, can use drop shopping to supply customers with less popular products. They take advantage of drop shopping to limit their inventories without narrowing their product selection.
Though you can deploy drop shipping in many different ways, the best chance of building up a business into something profitable, sustainable, and scalable is to build an eCommerce site of your own.
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GfK Loyalty Plus Dropshipping Insights and Predictions
The GFK loyalty research offers exclusive insights into the loyalty of customers who receive their product via dropshipping.
The GfK Point of View
Loyalty is more than likelihood to recommend, it has behaviorial and attitudinal dimensions. GfK Loyalty Plus measures the intensity of customer relationships on important behavioral and attitudinal dimensions including:
- Current and past behavior
Often, but not always, current and past behavior is a good predictor of future behavior. Behavioral loyalty measures include actual word of mouth and may include share of requirements and/or number of products or services purchased.
- Intended behavior
Intentions about continuing the relationship are often good predictors of future behavior as well. These include survey questions such as ‘likelihood to recommend’ and ‘likelihood to continue and grow the relationship’.
- Emotional ties
Attitudes that reflect deep-seated feelings toward the relationship may be more stable and predictive of future loyalty than either behaviors or intentions. Emotional ties are measured with survey questions about issues such as trustworthiness, respect and relevance.
- Rational ties
To capture the logical reasons for maintaining customer relationships, we measure rational ties. These include such things as quality, convenience and value.
GfK Loyalty Plus enables companies to:
Improve their dropshipping methods – customer retention by understanding how satisfaction and other factors affect loyalty.
Identify and manage loyalty segments—that each have unique strategic implications. Based on GfK Loyalty Plus and satisfaction scores, customers are classified into loyalty segments: Loyal Advocate, Ambivalent, Hostage, and Exit Bound.
Score databases and build predictive models—to guide strategy and tactics for improving loyalty and the bottom line, including:
- Loyalty and Attrition Models
- Value Simulator
- Customer Lifetime Value estimates for ROI models
Focus on bottom line results by linking customer loyalty improvements to profits.
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