This holiday season, consumers are expected to spend nearly $ 885 billion, and retailers across the globe are looking for ways to increase their individual share of that revenue pie.
For big box retailers like Walmart, Best Buy and Home Depot, product line expansion is a key part of their holiday revenue share strategy. These businesses are continuously adding products to increase customer average order value and drive increased sales. For the SMBs out there, though, a product expansion strategy remains more risky. While increasing your product assortment does increase your chances of expanding your customer base, there is no guarantee those new products will sell.
To make things more complicated for SMBs, a product expansion strategy often requires an increase in warehouse square footage, which increases costs. For items that will sell quickly, that cost can be off-set. But, for items that sit on the shelf, storage and inventory costs quickly add up.
This is where a dropshipping holiday strategy comes into play.
Dropshipping is typically a business strategy used by start-ups to test out the ecommerce waters. It is low risk given that the dropshipper will house all the inventory. You simply set up a site and start selling. The problem with dropshippers, however, is that few of the items are unique. So, in order to build a successful business off of dropshipping, your brand must offer excellent customer service and brand recognition –– otherwise consumers will simply buy the same product on another site for less money.
For online businesses already past the start-up stage, dropshipping is rarely part of their integrated strategy. However, for those SMBs looking to compete with bigger box retailers during the holiday selling season without increasing overhead costs, a dropshipper may very well be your best option.
According to SparkPay, 34% of products sold in 2012 from Amazon were done so via dropshipping. That’s $ 14.2 billion worth of merchandise. If dropshipping can work that well for the world’s largest marketplace, then there is no reason why it can’t help your scaling business increase average order value and customer loyalty throughout the holidays.
Here’s how you can start implementing dropshipping to expand your product catalog immediately.
How Dropshipping Works
In case you are unfamiliar with the term, dropshipping is a form of product fulfillment in which orders are shipped directly from a wholesale supplier to a customer. The retailer never touches or owns the products they’re dropshipping. Instead, these items remain in the wholesale supplier’s warehouse.
The process looks something like this:
- A customer sees an item for sale on a retailer’s website
- They place an order for that item
- The retailer routes that order to the wholesale supplier
- The supplier then packages and ship that order directly to the customer
The only work on the retailer’s end is in choosing which products to list, and automating a process via which to send orders to your supplier. Dropshipping reduces the risk usually associated with expanding your catalog by removing the need to house physical products yourself.
How to Get up and Running for the Holidays
Getting started with dropshipping is simple. First, you’ll need to find a dropship supplier. This can be a bit of a process, but it’s worth your time to search for a quality supplier. Otherwise, you’ll run into fulfillment issues down the road, which can subsequently harm your customer experience reputation.
You can find suppliers in numerous ways. Google searches and purchasing catalogs are the top options. To make sure you’re finding quality suppliers, consider the following tips:
- Don’t be scared off by bad websites: Wholesale suppliers are notorious for having Web 1.0-style websites. Seeing a ‘bad’ site shouldn’t dissuade you from talking to or engaging with that supplier.
- Contact the manufacturers: Contacting the manufacturers of the products you wish to sell is a great way to find reliable wholesale suppliers. The manufacturers will have a list of their wholesale suppliers, and from there you can contact suppliers until you find one that is willing to dropship products.
- Call the suppliers: Once you’ve found a supplier, call them to verify their legitimacy. Ask for references on which you can call to ensure that the suppliers are professional and timely.
Dropshipping can be an excellent way for small-to-mid-sized online retailers to expand their product assortments and grow their customer reach, especially during the busy holiday shopping season. A/B test with products to find which sell best with your existing merchandise base. From there, you can choose to build out your catalog permanently and pull inventory in-house, or opt for dropshipping support during busy seasons to help close deals over other competitors.