As one of the UK’s leading drop ship companies, here at Timber World we know that there are a lot of people who have heard the term ‘dropshipping’ but don’t fully know what it means. The aim of this guide is to give readers an understanding of dropshipping and to explain how the process works.
What is dropshipping?
Quite simply, dropshipping is a service offered by wholesalers to retailers whereby they deliver the product directly to the customer on the retailers’ behalf. This model replaces the traditional model of the wholesaler delivering to the retailer and then the retailer delivering to the customer.
What kinds of businesses is dropshipping suitable for?
Dropshipping isn’t suitable for all types of business. If you have a physical shop or outlet and sell products that customers expect to be able to take home with them, then it’s important to have those products in stock.
However, if you sell products that need ordering before delivery, such as a log cabin, or if you sell any product online, then dropshipping can be a viable delivery model.
What are the advantages of dropshipping?
Dropshipping has many advantages for the retailer. The main advantage is that you do not need to order your items in advance or in bulk. This means that there is no risk in losing money though buying products which you might not sell. It also means a more stable cash flow as you do not need to order and pay for products in up front. With dropshipping, you take the order from your customer before you pay the wholesaler.
Dropshipping also helps the retailer to save money. As you will not have products on site, you will not need to warehouse, deliver or insure them. Nor will you need warehouse staff.
Another advantage is that delivery is often quicker, as wholesalers often have far more advanced logistic systems in place than smaller retailers who often rely on 3rd party shipping companies or Royal Mail.
Is it true that dropshipping offers smaller margins?
The answer to this depends upon how you do the calculations. In general, the margins are smaller, but not necessarily the profits. If you take a product that retails for £100, you might get it at whole sale price for £66 and at a dropship price for £85. It looks at first that you will make £19 more through the traditional wholesale method. However, out of that £19 you will need to deduct storage, delivery and insurance costs plus any labour costs needed to handle and dispatch the product. In addition, in order to get a price of £66 you may need to order 20 of the products in advance and may only be able to sell 15 at full price, the rest may need to be sold off cheaply in a sale.
In the end, it’s a matter of choice. However, if you don’t have the necessary cash flow to pay in advance and don’t have the logistics set up to warehouse and dispatch the products, than dropshipping is a safe and sensible option.
At Timber World, for example, we offer between 10% – 15% margins on our log cabins. This means that you could be making several hundred pounds on each sale you make.
What are the disadvantages to dropshipping?
Dropshipping in itself has no disadvantages. It’s offered by many wholesalers to help smaller companies sell on the internet and whilst it is only just starting to take off in the UK it’s a highly established practice in the USA. The only disadvantage is in choosing a dropshipper that cannot deliver the right product at the right time to the right customer. One thing to remember is that a good drop ship company will not charge you for opening an account.
Are you looking for a wholesaler who will drop ship for you?
Here at Timber World we are actively looking for retailers who we can build long term dropshipping relationships with. We want to help you to sell our log cabins, garden offices and bespoke garden buildings. If you want to find out more about our great products and first class dropshipping service, click here.