What is drop-shipping and how to use it

in Business Hacks

by
Samuel Cabodi (sca)

Save time on delivery using an alternative shipping method

If you plan on setting up an eCommerce site (or already have one), you're probably looking into alternative shipment methods for the orders you receive. Here are the necessary tips and tricks to avoid bad experiences both for you and your customers when drop-shipping

If you're not familiar with the term, drop-shipping is a system that allows orders taken from your store to be shipped straight from your supplier to your customer.

There are many advantages to this system. First, the items are delivered much faster, as any intermediate is cut out. It also means that you can reduce the size of your warehouse or even get rid of it altogether and, of course, eliminating this cost saves you money. You don't even have to worry about preparing shipping details, quotes, etc. It's all part of your drop-shipping contract.

That's actually the reason why we've integrated it in Odoo as a standard function in our WMS. We've made it so that in just a few clicks, you can get it up and running and even setup automated functions. The system will then automatically forward the order details to your supplier, who will process it and ship it.

Mind you, drop-shipping's not all fancy and wonderful. Because your supplier does most of the work, it's important to know who you're working with. There are litteraly millions of companies offering their services but not all of them are reliable - which means that you could be the one to end up with a bad reputation when the supplier delivers a bad service. For example, if the parcel arrives at its destination damaged, or even gets lost on the way, you will have to deal with providing customer service and support and also keep in contact with your supplier to resolve the issue. And, last but not least, drop-shipping is not a free, like most services.

Here are some rules to bear in mind to get a drop-shipping service that suits your company :

  • Use drop-shipping only for the products you can't or don't want to keep in stock. One reason is that you'll always make smaller margins on items that are drop-shipped, so you should keep it only for items that take up a lot of space in your warehouse.
  • Drop-shipping is best for niche products. Chances are that products that are in high demand are being offered by large suppliers at a fraction of the price you'll be able to charge, so using a more costly shipping method won't be financially rewarding. But if your product is unique, then it makes sense!

For example, one of our clients, Inspiral, specialises in import-export of para-medical material. Drop-shipping was the best solution for them as their range of products is wide and their items are mostly large in size, but demand for each item is quite low.

  • To protect your customers from bad experiences, test drop-shipping companies for yourself beforehand and list the best ones. 

At Odoo, we've had to deal with trouble from some of our suppliers. So we found it very useful for ourselves (and hopefully all our users) to include automated functions based on each user's list of suppliers in our Warehouse Management System.

  • Make sure time is not against you. Drop-shipping should take a reasonable amount of time and surely not more than it would have taken you to handle it all by yourself. It's also nice to be able to provide your customers with a tracking number.
  • Items have to be available from your supplier. It's good to know if the product you're selling is available upstream. If you don't have that information, inform your customers that you don't hold the item in stock and that it's subject to availability from a third party.

You can also plan with your supplier to receive an updates on their stock levels on a regular basis, for instance using a spreadsheet. If you use our WMS, you can load the spreadsheet into the system in just one click and your supplier's stock levels will be updated straight on your eCommerce website. It's a simple way to avoid stock shortages even when the stocks isn't actually yours!

Hopefully, these tips will help you get things running smoothly. In the meantime, feel free to try our Warehouse Management System (it's free for 2 users, like all our modules) and test the drop-shipping option.


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