Online retail offers many opportunities to new start-up business that are looking to sell their own manufactured products or those who third party white goods brands using online fulfillment services such as Amazon, Ebay or Not-On-The-High-Street; who already have a well established audience and customer base with the infrastructure to pick, pack and ship goods quickly and globally .
Deciding on what type of online new start-up business you will operate and how to dispatch goods, depending on the level of involvement you would like in the process is a conscious decision. Years ago, an individual company would have managed the whole supply chain from manufacture to storing stock and then dispatching the order. However, with the introduction of dropshipping this no longer needs to be the case.
So how does dropshipping work?
Dropshipping is applied when companies do not wish to hold stock on their premises. Instead they sell the stock online either through their own brand or through a fulfillment service, the order is then sent to the third party seller which is often a manufacturer or wholesaler, who will then dispatch the goods on their behalf of the company for whom the order has been placed with. This means that the company never needs to handle the stock and instead, just processes the paperwork.
What should businesses think about when considering using dropshipping?
Companies who are starting out with a plan to use dropshipping should first seek to find reputable brands that are well tested and certificated to British standards. Choosing poor quality brands will not only affect your own brand but will also create a lot of paperwork in returns.
Start-up businesses should do their research to find reputable wholesalers and manufacturers that can manage the demand for orders should the business expand and should check as to how they store stock i.e. safety and risk assessments.
Agreeing terms on the dispatching of stock through the drop-shipper is also important when offering choices on postage and shipping through the front end, to the customer.
Why is dropshipping a good idea to use for your new start-up business?
Dropshipping offers many advantages to businesses looking to startup. Firstly, as businesses don’t carry stock their overheads can be fairly low as so they don’t require warehousing or the upfront capital to buy up lots of stock when starting out, which makes the business fairly low risk in the early days.
It also offers a flexible method of selling as if a product brand doesn’t seem to be selling well then it can be easily removed or replaced with something else. Equally, it scale-able! So if you discover your best brands, you can then upscale on specific makes and models. It also means that you can introduce a range of brands and don’t have to stick to one specific sector i.e. you could sell make-up products and electrical goods as they would appear in separate categories of the fulfillment website.
Because the company packs and dispatches the goods on behalf of the seller, means that the seller doesn’t have to get involved. Neither do you need to manage and unpack returns, other than overseeing the paperwork.
If you are thinking about using dropshipping to facilitate your start-up business or are already established in this area or retail and require dropshipping insurance, then contact us to find out more. Here at Crendon insurance we offer a wealth of expertise in this field and can tailor an insurance package to protect your online retail business which includes insurance protection for fulfillment, dropshipping and IT liability.
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