Winter 2011

Doing Business with Drop Shipping By Lynn Switanowski

Drop shipping is more than a buzzword. It can offer your store significant advantages. Find out if this retail mode of operation will work for you.

Retail 2010 is a global business no matter what size retail business you operate. Think of it this way: Whether your store is located in San Francisco or Boston, you may have customers coming in from Japan or Ireland. Those of you with online business components may ship your products halfway around the world on any given day. And many of you may already be sourcing products from overseas to fill your store shelves.

This dramatically changing world of global retailing can present some challenges, but it can also present many opportunities for retailers who are willing to adapt and pursue new ways of thinking. For one thing, by adding drop shipping to your product sourcing options, you can source more products for your business, without increasing the dollar amount of inventory you carry.

The drop shipping model can be very profitable if done correctly and can make your customers even more loyal to your business because of the unique mix of products you are able to offer them. Here are five things you should know about drop shipping so you can figure out if it’s right for your business.

What is Drop Shipping? In drop shipping, retailers source products directly from a manufacturing partner and the manufacturer (or distributor) ships directly to retail customers—on your behalf. So you don’t have to invest in large amounts of inventory upfront. The products get shipped from the supplier when your customer places an order. Even better, you don’t have to bear the freight and inventory handling charges. The drop-shipping model works especially well for bulky products that would be expensive to ship and hard to store.

Drop shipping can work for both retail and online gift stores. For brick-and-mortar storefronts, the manufacturer provides samples of the products to display in store. Once a purchase is made, the manufacturer is alerted and ships the product directly to the customer. The manufacturer acts as your store’s “shipping department” and the product would look and feel like it had come from your store. Store samples can make customers feel comfortable about the quality of the product being offered. The samples help reassure customers because they set expectations about product quality.

Online gift shops would use drop shipping in a similar way except, of course, they wouldn’t need physical samples of product. When done with the right manufacturing partners, your customers would not notice any difference between drop-shipped products and those that you would ship out of your warehouse or shipping location.

There are several advantages to using drop shipping for a gift store retailer. First and foremost, drop shipping can be a cost-saving measure. Since you eliminate the

Personalized Products with Drop Shipping

Customized products are especially amenable to drop shopping procedures. Especially elaborate custom products require time to complete. How do you insure that your customers will be happy to wait?

Most customers understand that if they are customizing products, there will be a lag time in delivery. Typically, this is not a deterrent as they are already in a “wait for delivery” mindset when they choose to customize/personalize a product.

To insure that your customers will be satisfied long term with their purchase—and the process it takes to deliver it to them, make sure to communicate clear delivery information from the outset. Follow up regularly to let customers know that their products are still planning to be delivered on time. This added communication between you and your customer gives you another opportunity to market additional products they may want to purchase from your store.

If there are going to be any delays, update your customers immediately and offer some sort of restitution that seems appropriate based on the potential delay. This might be as simple as dropping off the purchase at the customer’s home, or sending it giftwrapped to the person it was originally intended for.

Mistakes happen in the world of customized products; your store will be judged on how you deal with these mistakes. Your customer has been waiting patiently for their customized product and when it arrives, there is a mistake. This is never a good thing, but how you respond can turn a dissatisfied customer into a brand evangelist for years to come. If there’s a mistake, even if it’s through no fault of your own, the key is to deal with it immediately. Offer to re-order the products and expedite shipping at your expense. Better yet, use the occasion to make a “wow” impression by offering the replacement product for free. This effort clearly shows your customer that you are willing to stand behind any products you sell and that you will go to any measure to insure their satisfaction.

At the end of the day, the price of your customers’ long term goodwill and any potential word-of-mouth referrals are worth much more than the cost it takes to replace the item.

Lynn Switanowski

Lynn Switanowski-Barrett is the founder of Creative Business Consulting Group, a retail-consulting firm based in Boston, MA. CBCG works with businesses of all size to create and implement profit-improving sales, marketing and inventory management strategies. For more information, please email lynn@cbc-group.net.