Drop Shipping: How to Run Your eCommerce Business with NO Inventory

December 7, 2015

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When I was a Girl Guide, I sold cookies as part of raising money for my unit.  Selling was easy: customers could enter the desired number of boxes on an order form, and a total price was calculated. 

When the boxes of cookies arrived several weeks later, the real work began. My mother and I would sit down and sort out each order, making sure they were marked with the customer’s name and amount owed on little sticky-notes.  Often motivated by recognition to be the top-seller in your unit, I tried to sell as many boxes as possible, which only resulted in more work.  Sometimes it happened that we were missing a box or two, and sometimes we had a few too many.  Either way, it took us a few hours to get everything sorted and figured out.

The inventory process was difficult, but it was an event that happened only once a year.

 

Most business owners wouldn’t consider inventory management a “fun” part of their job, considering it can be both time-consuming and costly.  But it is a necessary evil for many, given you must have inventory in order to have sales, right?  Not necessarily.

Drop shipping has given eCommerce businesses a way to not only be successful, but lower their operating costs by requiring little-to-no inventory management.  As ecommercefuel.com clearly defines the business model:

“Drop shipping is a fulfillment model that allows you to buy products individually from a wholesaler and ship them directly to your customer.  Instead of purchasing a large amount of inventory, you simply partner with a drop shipping supplier and list their merchandise for sale. Then, once you receive an order you forward it to the supplier for fulfillment. The supplier will ship the product directly from their warehouse to your customer, and charge you only for the price of the shipped item.”

 

What are the benefits?

  • Lower capital investment as you only pay for ordered product;
  • Broader product variety given you don’t need to purchase everything you want to sell upfront;
  • Reduced real estate and warehousing costs;
  • Streamlined order processing given you don’t handle manually fulfilling orders yourself.  And these are only a handful of the many benefits of drop shipping.

Shipping is only one of many the decisions to be made when opening an eCommerce business, and with the simplicity offered by drop shipping, it’s an option to explore, particularly if you are starting with low capital and/or resources. 

 

To learn more about starting up your eCommerce business, and for steps on where to begin, download our FREE guide: A "To-Do" List for Setting Up Your Online Business.

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