There is power in dropshipping. On RangeMe, retail buyers are constantly looking for suppliers that can help support their e-commerce sales by being dropship capable. As the CPG industry launches into a digital transformation, more retailers are looking for brands that can ship products directly to customers. Read on for a quick lesson on dropshipping. 

What is dropshipping?

Dropshipping is a type of retail fulfillment method where a manufacturer, wholesaler, distributor, or retailer does not keep the products they sell in stock and does not own the inventory. When an order is placed through a brand or through a retailer, and then a duplicate order is placed with a third party (ie, a dropshipping partner) that actually stocks the product. The order is then shipped directly to the consumer from that third party on the brand or retailer’s behalf. Dropshipping means that you never actually purchase or hold any inventory, as it’s all coordinated through the drop shipper. The dropshipping method allows the seller to handle the product indirectly and rely on wholesalers or manufacturers to fulfill the orders.  

Dropshipping is a good option for businesses that are not quite ready to make a large investment in stocking inventory and managing the logistics of warehousing space. It is most commonly used by wholesalers who stock bulk inventory and by retailers who do not want to invest capital in stocking inventory. However, as a product manufacturer, you can also operate as your own drop shipper, meaning that you have product inventory in bulk and are willing to ship direct-to-consumer when an order is placed through a retailer. 

Ready to set up dropshipping? Explore shipping providers who are ready to help grow your brand. 

Advantages of dropshipping

There are several reasons why dropshipping is popular among entrepreneurs and retailers. Let’s take a look at the top three reasons sellers choose dropshipping: 

It’s cost-effective: The main interest in this method is how cost-effective it is. Meaning, the seller saves cash by not having to invest a huge chunk of change on inventory that will just sit there until a customer purchases. Instead, the seller is able to have more cash on hand by sending products when purchases come through. Not to mention you minimize overhead expenses. 

It’s time-efficient: Dropshipping can save you a lot more time by eliminating certain tasks and responsibilities such as paying for a warehouse, packing and shipping orders, managing returns, tracking inventory, and managing inventory orders. 

It provides flexibility: Not only do you get flexibility in where you decide to run your business–which is super important right now amidst a global pandemic–but you also get flexibility in the types of products you want to sell/what types of products a retailer wants to test. 

While dropshipping has major perks for brands and retailers starting out, there are some shortcomings to be aware of such as warehouse errors and inventory issues, low margins, and complexity with shipping costs.

To learn more about the advantages and disadvantages of dropshipping, go here. 

How does dropshipping fulfillment work? 

In the consumer packaged goods (CPG) industry, there are retailers, suppliers, and manufacturers. These are the main players in the dropshipping model. Retailers sell their products directly to customers, with a markup. These retailers are often searching for suppliers that are capable of drop shipping and have a distributor or warehousing set up for dropshipping, as mentioned above. Here’s how it works: 

Step 1: A customer places an order with a retailer such as Walgreens or Bed, Bath & Beyond.  

  • Both the customer and the retailer receive an order confirmation
  • Payment is deposited to the retailer

Step 2: The retailer places an order with the supplier who makes the product that was purchased. 

  • Retailer notifies supplier of purchase
  • Supplier manages orders either manually or automatically through a common inventory management system

Step 3: The supplier sends the product(s) directly to the customer

  • After the order is placed with the supplier, the supplier will charge the retailer for the cost of the purchase order
  • The supplier will box up the order to look like it is directly coming from the retailer (Labels will include retailers address, logo, etc.) and send to customer

Step 4: The retailer notifies the customer of shipment

  • The supplier sends the retailer the tracking information
  • Retailer notifies the customer that their order is on the way
The Drop Ship Model Image

Is dropshipping right for you?

Dropshipping has its perks, but it also has its disadvantages that every supplier and retailer should be aware of. Not every retailer will want to use the dropshipping fulfillment method, but as e-commerce continues to grow, especially in the current climate of a pandemic, it’s an option that retailers are turning to in order to get their products to customers faster. It’s important to explore your options as dropshipping works situationally, so head over to RangeMe Services to explore shipping providers ready to help you get started. 

Are you already dropship capable? Make sure to update your RangeMe profile to appear in buyer searches for dropship capable brands and products. 

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