Drop shipping, seemingly made famous by Tim Ferris in his book The 4hr work week, is an exceptionally useful way to get your e-commerce store started.
Drop shipping companies don’t store any products or manufacture anything at all. What you get is basically a commission. You connect customers with products and get a finders-fee for your trouble. It’s just like what Etsy and Shopify and every other shopping platform do except it’s one person with less overhead costs – precisely what draws new entrants to the model in the first place.
Without the overhead inherent in creating or housing your own products, drop shipping companies are free to focus their efforts on researching what sells and saving up for potential growth opportunities.
So, where do you start?
There are two kinds of people who want to start a retail store, those with a passion for a certain product or product family who want to find a market, and those who see a market and want to find a product. Historically, the latter see far more success, at least in their early years. Building a brand takes time so jumping into a boutique-style store that sells to a niche clientele isn’t usually viable when you’re just getting started. This principle is why the best way to get started with drop shipping is to think more generally. We’ve talked about it before, the current reigning king of the e-tail space is the general store.
As a drop shipping store, you’re essentially a curator. You scour and research and find products that consumers would typically have to get direct for certain manufacturers and putting them all in one convenient space. For Australians in particular, this is a Big Deal. Getting products into Australia can be an arduous and expensive process, it’s why for years Australian stores have had a remarkably narrow range of products and some quietly brewing monopolies in the retail space, but that’s all changing and drop shipping is a huge part of it.
But what happens when you really want to grow?
Drop shipping might be a great way to build cash reserves, but it doesn’t build your brand. A store that sells lots of things isn’t known for any particular thing and can be easily replaced if the products stop suiting your customers’ needs or a new competitor undercuts you. That’s why you’ve got to take what you can get from your initial forays into drop shipping and transition that into a business that will truly last.
Once you’ve got a certain level of success, you know what sells and what doesn’t (because you’ve watched your analytics like a hawk), it’s time to think about what’s next. At that point, given Australia’s global location, it might be time to invest in a 3PL logistics supplier that can add real value to your business. Once your business is of a certain turnover size, not only will you be able to get better deals on bulk quantities, you’ll also be better across what sells (and can order in advance) which of course, means quicker shipping. And that makes for happier customers. No-one likes waiting for their stuff to clear customs or get stuck on a dock somewhere, etc. Plus, let’s face it, no-one’s going to take care of your customers better than you can. And if you’re left out of designing the customer experience completely, there’s very little way you can really differentiate yourself.
Working with a 3PL partner, means you can begin to build a real customer experience (we have some tips here!) rather than a transaction.
This is where that latter kind of business owners get to start to bring in that passion for products they quite possibly had to ignore when they got started – it’s the difference between an e-commerce store on the side as a hobby and building a business.
Building a brand is all about creating that boutique experience and now that you’ve got the funds, the research and the customers, your small online store is built on solid foundations. Ready to grow faster.
If you’d like to explore how a 3PL partner can help your business grow, we’d be delighted to help. You can always give us a call on +61 2 9828 0111 (Sydney), +61 3 9240 6300 (Melbourne) or +64 9 263 8855 (Auckland) or drop us a note via the form below. Alternatively, you can find a full list of available services here.
