Why dropshipping for online retailers is the way forward!

Why drop-shipping for online retailers is the way forward!

So we all need products. Everything monetary is either a thing or a service. So why is it couriers are overrun and underfunded, why are retailers and small businesses going out of business and why are some things so darn expensive??

So to start we need a creator of the product, someone to make it, then it needs to end up with the customer. Simple right....I mean surely if it went from A to B logistically that would be best all round. Or if manufactured overseas it went to 1 place in the customers country and then straight to them.

Well this is what is currently happening....

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This above is worldwide.....now imagine even more of those squiggles all over New Zealand!

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....and if you're wondering why there a so many big trucks and stressed out couriers wonder no longer.

So there are 4 people in this story. Creator, Manufacturer, Retailer, Customer.

You see, when a creator gets their order produced at a factory by the manufacturer they have to have an MOQ (minimum order quantity). So it's somewhat understandable that he should want to clear and sell as many units as possible asap. The only thing is if he is sending them to retailers the retailers will want 100% mark up or something along those lines....why? Well to cover the extra shipping to themselves, storage cost, having to repackage & post again, handling time if an online store or power and staff overheads of a shop etc etc..

So this leaves the creator with a smaller margin and leaves the retailer with stock to hold and hopefully sell. With the added inevitable risk  of either having not enough or too much stock. So you have all these retailers with different amounts of stock trying to hold the perfect amount.
And whats worse...with online shopping that unit may well end up having to be couriered all the way back to where it came from (usually Auckland) if the sale is made there. And not even sold locally after all. I.e from Auckland to Queenstown then back up to Auckland again.

doh. facepalm

So what happens when the creator runs out of stock. More is ordered from overseas usually at a rush when there are still plenty more in the country. Hhmmmm.

So the creator may be selling units himself - the retailer and creator have them at the same RRP. He is already packaging units up to send single one by one to customers. He may even have a 20% off sale to clear a bit of stock but due to only 1 website it doesn't get as much exposure.

He then clears MOQ to retailers at a lesser price with an instant boost to the bank account and a bit of extra space. But the space will only be filled again on his next order anyway.
And the bank account boost?...well he has made less money on each sale...by quite a margin.

So lets start looking at how some larger, successful retailers do it....


1 Response

  1. Good write up! Completely makes sence. Hopefully others will start to see the light

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