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WISHLIST
Considering exploring the world of drop shipping? Learn what to look for in a good drop shipping partner to ensure success in your business.
Inventory management and carrying costs have long been challenging aspects of running a profitable retail business.
Store owners must accurately predict consumer demand, stock adequate inventory, provide warehouse storage, and manage shipment logistics - all while keeping cash flow healthy. This intricate balancing act has only grown more difficult with the rise of ecommerce and fickle consumer shopping habits.
To help meet the growing gap between consumer expectations and retailer deliverables, drop shipping has emerged as an attractive alternative. By partnering with reliable drop shipping suppliers, retailers can significantly reduce upfront inventory investments and overhead while still meeting consumer demand.
But choosing the right partner is key. Not only do you want a drop shipping service that meets your budget lines, but it should provide ample stock levels, transparent reporting, niche specialization, non-compete assurances, and the operational support needed to maximize online retail success.
Drop shipping is a streamlined retail fulfillment model that enables store owners to sell products without physically handling or housing inventory. Instead, they partner with behind-the-scenes suppliers who stock product inventory in their own warehouses.
When an order is placed through a retailer’s online storefront, purchase details are sent electronically to the drop shipping partner. This supplier processes the complete order, picks & packs the products from their warehouse shelves, and ships directly to the buying customer.
The key benefit for retailers is eliminating the need to invest in upfront product inventory or manage complex shipping logistics.
By leveraging drop shipping suppliers for procurement and fulfillment, retailers can launch ecommerce stores and scale product listings faster and more affordably than operating their own warehouses. It also enables quick expansion into new product lines without overextending inventory budgets.
In essence, drop shipping allows retailers to focus solely on driving sales through marketing and customer acquisition. While fulfillment partners handle the back-end product sourcing, order processing, and shipping logistics to deliver a seamless customer experience.
Before diving into what makes an ideal drop shipping partner, it's important to level-set on some key terminology within the drop shipping ecosystem.
Drop Shipper - The behind-the-scenes supplier handles warehousing inventory and shipping products directly to customers. They enable the retailer to sell products without handling fulfillment.
Retailer (eTailer) - The storefront selling products directly to end consumers. They drive marketing and sales but outsource fulfillment. Also referred to as resellers.
Reseller - Retailers selling products sourced from another party. Includes brick-and-mortar shops, ecommerce stores, online marketplaces, and more.
Distributor - A company that purchases inventory from suppliers and sells products to resellers. They take title ownership of inventory.
Dealer - Similar to a distributor but more specialized in a product category or industry.
Wholesaler - A company that sells products in bulk quantity to resellers who then sell to end consumers.
Clarifying these terms is key to understanding the various players within a drop shipping model. The core relationship is between retailers and the behind-the-scenes drop shipper who provides fulfillment services.
So, what goes into a quality drop shipping partner? As you are evaluating a potential drop shipping partner, here are several factors you should keep front-of-mind to ensure a successful long-term relationship:
The foundation of any good drop shipping program is having adequate inventory readily available to fill orders quickly. Without sufficient product stock and transparency into real-time inventory levels, retailers risk losing customers and revenue due to delayed fulfillment and out-of-stock issues.
Ideally, partner with a domestic supplier that houses key product inventory in U.S. warehouses. Storing stock domestically enables faster order processing and shipping times, as products can reach customers typically in 2-7 business days.
Suppliers housing all inventory overseas can lead to 3-6 week shipping windows - an eternity in the world of online retail, where 67% of customers expect orders to arrive in under three days.
Ensure your drop ship partner also provides accurate and up-to-date inventory reporting. Real-time visibility enables smart inventory planning and confidence in selling available products.
Leading suppliers offer electronic inventory feeds, providing 24/7 inventory transparency through EDI connections, API integrations, or simple data file transfers. Access to current product availability and order management data is invaluable.
Finally, high in-stock and fill rates are crucial for avoiding abandoned shopping carts. Industry standards range from 95-98%, meaning 95-98% of items ordered ship complete without any fulfillment issues.
Be skeptical of any partners claiming 100% fill rates, as even minor warehouse, shipping, or quality control issues can happen. Ask for historical fill rate data month-over-month and across peak retail seasons.
By confirming available domestic stock, real-time reporting, and high fill rates, retailers can feel at ease with inventory risks outsourced to an expert drop shipping partner. Focus sells while your partner handles procurement and logistics behind the scenes.
Order processing speed and overall shipping times directly impact the customer experience and satisfaction. Thus, leveraging the right technology to automate operations, streamline workflows, and optimize fulfillment is critical for drop shipping success.
Ideally, your supply partner provides seamless electronic order integration through EDI or API connections. This eliminates the need to manually upload orders, saving significant time and reducing human error risks. Packed with product info, order details sync automatically so your partner can start processing the shipment instantly.
EDI (Electronic Data Interchange) enables back-end system connectivity through standardized file structures for smooth data flows. Alternatively, API (Application Programming Interface) connections offer real-time order integrations between businesses. Discuss options with your partner to determine the best approach.
Top providers also utilize advanced shipping software to optimize fulfillment center activities. The right WMS (Warehouse Management System) software powers faster processing from inventory slots assignment to pick paths mapping. Zebra barcode scanners, thermal printers, and other technology often facilitate picking, packing, and shipping.
Most importantly, your partner's operations team should run like clockwork during peak retail seasons. Summer, back-to-school, holidays - when order volumes spike, your inventory and logistics support cannot waver. Stress test potential partners by assessing previous peak season performance.
Technology plays a pivotal role in efficiently getting purchases from your supplier's warehouse shelves into the eager hands of customers. Choose an integration-friendly partner dedicated to fulfillment performance despite seasonal spikes and external hiccups.
While outsourcing fulfillment eliminates upfront inventory acquisition costs, retailers still need healthy profit margins per sale to sustain ecommerce operations long-term. Carefully review expected pricing margins when assessing potential drop shipping partners.
Given wholesale rates, industry-standard margins for drop shipped goods range from 30% to 50%. However, specialty suppliers may offer even higher margin potential, giving retailers over 50%+ profit buffer per sale. Explore what types of bulk order discounts your prospective partner provides - buying in larger quantities can equate to better per-unit pricing.
You’ll also want confirmation that your supplier will cover “free shipping” guarantees. Absorbing shipping costs helps boost retail conversion rates significantly but ensures those margins aren’t fully eroded. Partners with well-negotiated small parcel contracts can ship affordably at scale.
Be upfront about your minimum margin requirements early when evaluating partners. Price thresholds will differ based on your business model and average order values. Specialty gift shops may aim for 100-200% markups while high-volume discount eTailers are satisfied at the 30% margin minimum.
While handing off procurement and logistics to an expert drop ship operator alleviates some major headaches, sufficient margins matter for profitability. Dive into the number details - don’t leave earnings assumptions to chance. With the right partner, orders can sail smoothly from their warehouse to your customer’s doorstep while you stack earnings all the way to the bank.
Ideally, your behind-the-scenes order fulfillment partner should NOT double as a competitor vying for your customers. However, some product suppliers sell direct to consumers, undercutting the very retailers they claim to empower through their drop shipping services.
Seek commitments from potential partners, guaranteeing they will not sell products on major online marketplaces. Amazon, eBay, Walmart, and other leading ecommerce sites represent prime real estate for consumer access and sales - thus, direct competition for store owners.
Ensure your marketing efforts aim to build your own brand and store’s value versus driving revenue for your sourcing partner.
However, suppliers may sell newly launched products directly for a short 3-6 month period to test market reception before opening up inventory for retail distribution. This allows them to perfect advertising and messaging based on customer feedback before handing it off to resellers. If your prospective partner follows this practice, clarify timelines for retail availability.
You’ll also want to confirm that your drop shipping partner refrains from investing in paid search/shopping campaigns focused on your target keywords and niche. This ensures your digital marketing spend goes towards growing your business instead of funneling customers to a competitor's website. While impossible to limit organic rankings, paid ad protections provide some shelter.
Vet potential drop shipping partners thoroughly and get non-compete terms in writing if at all questionable. Transparency on where your partner sells products curbs nasty surprises down the road. Your business’ hard-earned traffic and sales should stay firmly in your court through a trusting, mutually beneficial drop shipping relationship.
The most fruitful drop shipping partnerships are often with specialty suppliers focusing on a specific industry, product category, or brand. Narrowing expertise leads to improved inventory depth, higher fill rates, and better insight into seasonal demand within niches.
For example, Kemp USA specializes exclusively in water safety solutions for the competitive swimming, water rescue, and lifeguard communities. With over 50 years serving these distinct niches, Kemp has extensive knowledge of the latest gear, popular products, and purchase trends. They stock the right mix of inventory based on niche purchasing patterns.
This specialty advantage simply can't be replicated by broad wholesale distributors or giant 3PLs (third-party logistics providers) covering every product category imaginable. Without a precise understanding of niche seasons and inventory needs, generalists struggle to get the right items consistently on the shelf to fulfill orders.
So consider the power of partnering with a category expert for your particular retail business. Streamline sourcing by leveraging suppliers that breathe your industry dynamics day in and day out. Collection curation and inventory decisions will align smoothly with your store and customer interests.
While the benefit largely shows behind the scenes through improved inventory planning, customers also appreciate retailers positioned as go-to authorities within their niche. To highlight and remind customers of your focused product expertise through store branding, content marketing, etc. When your specialty supplier has your back, cement your reputation as the destination for niche buyers.
Many retailers leveraging drop shipping partners also sell products across major online marketplaces, with Amazon a top choice to expand reach. However, successfully selling on Amazon introduces some unique requirements for your behind-the-scenes order fulfillment process.
Namely, sellers need the capability to deliver Amazon-specific labeling, packaging, and shipping confirmations with each order. This includes printing FNSKUs (Amazon product codes) on the packaging, bagging items in Amazon-branded poly bags, and integrating tracking data with Amazon for seller dashboard visibility.
Amazon partners must handle customer returns - providing pre-paid return shipping labels and refunding Amazon for returned purchase costs. This means seamlessly processing RTVs (return to vendor) on the back end.
Retailers leveraging Fulfillment By Amazon (FBA) need suppliers capable of shipping inventory to designated Amazon warehouses. This enables Amazon to handle storage, picking, packing, and customer shipment directly. However, not all products meet Amazon’s FBA requirements, so having standard direct-to-consumer fulfillment in place is key.
Identifying the right drop shipping partner is key to retail success. It alleviates major inventory headaches while empowering online growth not possible alone. When evaluating potential partners, ensure suppliers measure up across essential criteria like:
Kemp USA satisfies retailers across all these considerations, making us a leading drop ship supplier for stores in the swim, lifeguard, and water safety equipment industries. For over 50 years, we’ve fine-tuned niche inventory planning, warehouse workflows, and retail partnerships for maximum profitability.
Ready to turn over inventory headaches so you can focus on growing your business? Dive into partnership opportunities with Kemp USA's Drop Shipping Program today. Streamline success and leverage niche experts to make a splash in the water safety equipment market!
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