November 17, 2008
Retailers and Vendors Try Drop Shipping to Help Move Sales
Being concerned about the economy and slow retail sales isn't just a passing worry, its a daily crisis for hundreds of thousands of retailers, e-tailers, and vendors across the country. With a multitude of small businesses relying on consumer spending, many are scrambling to find new ways to simply keep money coming in while trying to entice the buying public to spend, spend, spend.
Ultimately, finding themselves with less cash and bare-bones access to credit to support wholesale purchasing, retailers are turning to drop shipping programs to help keep their businesses afloat. Drop shipping, while widely used in many retail sectors, is still an undiscovered method of buying and selling products for some small business, who may have heard the term, but are unfamiliar with how to drop ship and how it can be beneficial for moving inventory and cash flow.
Drop shipping works by allowing a retailer to offer products for sale which they do not carry on physical inventory. Instead, the retailer can carry images and a description of a product on their website or in their catalog, and when a customer places an order, the manufacturer/vendor of the product ships directly to the consumer. This means the retailer doesn't have to spend a bulk amount on new inventory or carry products they aren't sure will sell. Instead, the retailer takes a percentage of each drop shipped product sold.
“You bet I've looked to drop shipping! Cash is tight, credit is even tighter, so to keep my online boutique fresh with new products, I've been recently adding only those brands that I can drop-ship.” Tara Bloom of Maternitique.com, feeling the financial pinch of buying inventory in bulk, knew drop shipping could offer a cheaper alternative.
Bloom's second strategy to keep her boutique moving forward: Diversify-for which the drop shipping option also works well. “The latest drop shipped products we've added are organic and eco-friendly crib bedding and maternity clothing and organic baby clothing. These items aren't central to my store's brand message of pregnancy beauty, but they supplement our core products nicely and enable us to keep talking with moms and families after baby's been born.”
Ellen Bell, owner of www.homeproductsnmore.com, agrees. “About 90% of the products we sell online are drop shipped directly from the manufacturers to our customers. This means we've got a positive cash flow business-which is a good thing in this kind of economy with so many banks reluctant to lend, or extend open lines of credit.” Because products are moving slower, retailers are reluctant to add products to physical inventory which they are not sure will be good sellers. Instead, retailers can test the product's selling power with no financial risk by contracting it via drop shipping.
As retailers look for more available products with drop ship terms, vendors are finding new avenues for selling their products as they begin to fill the demand. For small manufacturers, home-based product sellers and other small vendor businesses, the increase in demand for 'no-strings attached' products is giving them more opportunities for placing products in retailer venues than ever before.
Sara Seumae of Choosespun.com launched her business earlier this year and has seen an increase in the amount of retail requests for drop shipping since. “We have been receiving a lot of requests for drop shipping and even consignment terms during the past couple of months. Drop shipping seems to be a mutually beneficial contract. We can not only get our product into stores and introduce it to their customer base, but also show the retailer how well our line can do for them. It's a way for them to "test" our brand without having to commit to an order.”
While some vendors don't see drop shipping as the preferred method of promoting and growing their products and brand, it is helpful in maintaining product exposure and sales. Jessica Russel from ShopTumbleWeed.com concurs, “I've recently been asked to do some drop shipping. I feel like at this time in the economy we all have to do what we can to make ends meet. It is not the ideal way to sell my products, but it gets my jewelery into stores.”
So, what are the common drawbacks for retailers and vendors with drop shipping? For retailers it often means giving up control of the shipping process and ensuring that products are packaged and shipped in a presentable and timely manner. For vendors, keeping products on inventory instead of off-loading them in a bulk wholesale order can mean less workable cash upfront. And, ensuring payment of goods sold through contracted retail outlets can be a challenge sometimes.
Gretchen Frankenstein has experienced some pitfalls in dealing with drop shipping for her site, Paceasy.com, mostly due to retailer's lack of preparedness or understanding of the drop shipping process. “It seems that a lot of smaller retailers are jumping on the drop ship bandwagon as a way to reduce their inventory and risk. However, many of them have not thought through the whole drop shipping arrangement and how it fits into their business model.”
Case in point, understanding how drop ship items are priced (including shipping and drop ship fees) is a crucial factor for both retailers and vendors in order to see how drop shipping affects the bottom line. To easier facilitate understanding and the implications of drop shipping with retailers, Frankenstein did her homework and made a plan. “We thoroughly researched drop shipping and designed our program and documents to eliminate as many barriers to understanding the program as possible.”
The bottom line: Anyone struggling with retail sales can take a closer look into drop shipping to see if the method can help generate sales, much needed cash, and move product. With little financial risk and a greater possibility of gain, drop shipping might provide a touch of relief for those who need it the most.
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Are You Prepared to Pitch Your Product?
So, lets say you've taken a BIG, deep breath and are ready to leap into pitching your product to retailers. Wait! Don't hold your breath too long-because first, you need to be sure you're ready.
You may be ready mentally, but are you ready with essential marketing must-haves? Many new sellers jump head first into chasing down retailers without the proper 'pitching gear'. You wouldn't have bring home a baby without everything you needed to take care of him, or leave the house without your wallet...so why would you pitch your product without being prepared?
Here is your gotta-have-it-done checklist for pitching your product:
1) Wholesale pricing set: Have you firmly decided on what you will sell your product for at wholesale, bulk discounts and wiggle-room to negotiate with buyers? If you haven't crunched the numbers, you need to before you agree to terms that you just can't afford.
2) Line sheets (also called sell sheets): A line sheet is a nicely composed page or two that show the absolute best possible pictures of the product you are trying to pitch. It can have things like; pictures, product specifications and options and then your wholesale and MSRP pricing. Your line sheets are your saving grace when an interested buyer wants immediate access to pictures and pricing. Just save in PDF and send. Better yet, keep it on your site and let buyers download on demand. Don't know where to have a line sheet made? Talk to you graphic designer-or your friend's graphic designer-and they can help you.
3) Packaging and displays: How will you package your product so that it is convenient for store owners to display on their shelves? Does it hang, need to be folded, come in a box, etc? However you package, if you are selling to others, you must consider their needs.
4) Samples: Do you have samples available for retailers to view? If so, have you considered how many you can afford to part with over several weeks or months of pitching? Have you factored in the cost of shipping samples to your bottom line?
5) Purchase Orders: Ah, the purchase order-your golden ticket to selling product. Your purchase order should have clearly spelled out terms for minimum order requirements, quantities, bulk discounts, tax and shipping costs, and terms. Of course you can customize your PO to fit your business.
6) Your Pitch: Well, now that you have the basis covered, its time to see if your verbal or email pitch is up to speed. Have you written down what you're going to say and then practiced it out loud a few hundred times? When you pick up that phone and make your first cold call...what are you going to say? When you open your email and create that pitch email...have you made sure it sounds concise, compelling and engaging?
OK, time to gather your 'pitching gear' and get going! ~Happy pitching!~
~Lisa
