SHOP, DROP, ROLL: The rise of drop shipping
Published on 21 May 2020
SHIPSHAPE SHOPPING
Wanderlost & Found creator Toby Leon defines drop shipping is a fulfillment method. Rather than having any inventory or stock of a product, when a customer orders product from your store, it is picked, packed and processed by a third party, a drop shipper.
An order drops into their system, they pick it, they pack it, they process it and they deliver it to your customer with your branding on the package and your branding on the invoice.
"Drop shipping allows you to punch above your weight because it removes a huge number of barriers to entry and drop shippers help your business because they're just as invested in your success as you are.
"Absolutely it does remove a lot of barriers and allows you more time to concentrate on building a better store and making better experiences for your customers," Toby explains.
Elize adds that having to purchase inventory upfront presents several risks and challenges.
"You have to have the money, you have to have a warehouse, you have to have insurance, and then you're also essentially guessing how many units of whatever you're going to sell... with drop shipping, all that risk is removed," Elize says.
EVERY BUSINESS HAS RISKS
Risk mitigation aside, Toby says like any business, drop shipping has risks. He believes a common misconception is that because all those barriers are removed, it must be easy. Many people find it is not.
So how do you "drop ship" and who should consider doing drop shipping?
Toby believes drop shipping can be for anyone and offers some applications to give a better sense of who might use it and why.
Example 1: Creating a community and store for Glampers
Using the example of someone wanting to create a community and store that caters to people who are obsessed with camping in style, aka Glampers, Toby says as well as focussing on that customer and their experiences, more opportunity lies within drop shipping as well.
"All of those 'glamping' products they are seeking will be available from different suppliers. You can curate that space and sell that experience through your content strategy," Toby advises.
Example 2: Artists wanting to expand globally
An artist himself, Toby explains drop shipping is ideal for artists with original work they want created and shipped globally, but can't afford to hire someone to produce it for them or don't want to have stock sitting in a warehouse.
"Drop shipping gives them an opportunity as a single solopreneur to actually create an entire space and range of products that are all printed on demand. There's no stock. When someone places an order, their original artwork is then produced and sent out for them," he explains.
Example 3: Businesses looking to value-add or diversify
Drop shipping can also be a viable avenue for existing business owners with products they manufacture themselves to add diversity to their range.
"They might actually work with drop shippers to add in those products. There's a lot of different applications, it’s really just a fulfillment method with a million different ways you can cut it," Toby advises.
SECURE YOUR SUPPLIER
Despite being around for decades, drop shipping is still a developing space, with new players coming in all the time. Key to the drop shipping model is finding the right suppliers and building strong relationships.
Toby says for those looking to enter a drop shipping venture, a lot of the grunt work such as research, development, assessment of a supplier's capabilities, has already been done.
"If you go onto most of these suppliers’ websites, they're going to have their own review system. You can go to Trustpilot and other sites where you can find third party reviews.
"I do a simple Google search of reviews for this company. There are all sorts of smaller third-party review sites that are independent and niche based.
"Never rely on one source, always go to as many as possible. If you see nothing but four star and five-star reviews, that's also an alarm bell,” Toby cautions.
Toby suggests searching online for top 50 drop shippers, saying there are lists already compiled which he found helpful in his own business Wanderlost & Found.
Diversity is always key when looking at a range information about a supplier. Toby recommends looking at suppliers’ reviews on their own site as well.
“It's the drop shippers aka other business owners looking at suppliers’ sites and leaving reviews so you will get different reactions and opinions from them.
“The next step is taking this information to that supplier, asking them direct questions and seeing how they react. When people talk to customer service, they want information.
“If I'm asking a tricky question because I'm troubleshooting or I don't know what's going on and I need really specific information, how long does it take them to find that? Do they have it readily available? Do they get thrown by the question? Is anyone else asking it?
“All of these give you an indication of company culture and what's going to happen if things go really wrong. Their reaction to your basic questions at the beginning is going to give you a good sign or a bad one about what they're going to do when things really need fixing fast,” Toby advises.
STARTING IS EASY
Toby says drop shipping suppliers make it very easy for businesses to set up their online store.
“They're keen for you to join so they're going to make it really easy by offering resources to help you get started,” Toby explains.
He says one advantage of drop shipping is that you have an entire team of people on your side that you do not have to pay until you get paid.
“You're essentially getting free help from people and if you realise this, you've got a big opportunity. I would strongly recommend taking the opportunity to dig deep and ask questions,”
“Learn more about logistics, learn more about production. It will help you in the long run and means you don't have to ask them every time something happens on your store because customers, they won't like that. If you must wait for someone else to give information about their order, it's not a good look for you,” he cautions.
All drop shippers will have a range of content ready to go that you can literally just copy and paste and stick into your website.
They want to make the entire process of finding them, signing up with them, designing products, choosing which regions you will ship to, through to setting up the backend of your store, as easy as possible.
However, Toby warns there are thousands of other people probably selling the same product as you. He suggests approaching the drop shipper and asking them if they have any content they haven't posted.
“Many will because they don't want slow loading pages so you can actually get videos and content that no one else has.
“Always make sure you are looking at what other people are doing with the same products, talking to a different audience. This helps even if it just reconfirms everything you're doing,” Toby encourages.
YOU ARE NOT YOUR CUSTOMER
Like all businesses, Toby says having a point of different is essential for a drop shipping store.
“Because drop shipping is a saturated market in a sense there's no opportunity… a lot of people are in the space already.
“They're not your products, they're not your designs. It's still all the same content you're producing through the drop shipper’s platform. If you don't mix it up and change it, if you don't add value on top of that, if you don't make sure that all the work that they've done is actually allowing you to punch above your weight, you're probably not going to get very far,” Toby proposes.
He urges businesses to remember they are not their customer; saying product changeover is quite fast and not to get attached to one drop shipper.
“Listen to customers to make sure you're not just reconfirming your own aesthetic every time you pick a product. You're not your customer…that's really important to remember.
“Don't base your whole business around a relationship with one drop shipper. You wouldn't put all of your eggs in one basket, you don't want to have your entire business health check being managed and assessed with this partner that you don't really have much control over.
“Use all of the work that they've done for you to actually focus your energy and attention to do better in other places where they can't help you, like the marketing,” he suggestion.
CHOOSING THE RIGHT E-COMMERCE PLATFORM
Wanderlost & Found uses Shopify as its e-Commerce platform, which founder Toby describes as a mix of Squarespace and WordPress.
He says the alternative Squarespace is much more like an Apple product where it comes right out of the box; you don't need to ask questions about it. It looks amazing. Anyone can use it. It's a little bit more expensive and it actually doesn't have as much functionality as an Android phone, which is closer to WordPress.
Toby says if you can code, WordPress is both cost effective and allows you to design the site yourself.
“If you have that tech gap in your skills, I wouldn't go for WordPress, I'll definitely stick with Shopify or Squarespace because it's probably the simplest out of all of them,” Toby recommends.
Your supplier of choice can then easily provide product images and descriptions to populate your shop.
WITHSTANDING SATURATION
So, if everyone else is selling the same product, how do you make yourself stand out from the competition? This is where your branding and marketing comes to the fore.
Toby’s preference for branding is to leave it to the end of the business development process.
“Not everyone works the same way, but I found I spent a lot of time trying to come up with an amazing name, choosing colours, the perfect shapes. All this still needs to be done, but when you're guided by your instinct your customer, you're going to find a lot of the branding work is done for you by the time you get to the end because you will have made so many decisions along the way that will weigh into your conversations about branding,” Toby observes.
He says the products you choose are going to have a particular aesthetic and qualities and sourced from a certain region. All these considerations help build a picture of your brand.
“What is my brand won't be someone else's,” he says.
TEST EARLY, START SMALL
The next step in the drop shipping journey involves testing the market. At this point, Toby adds a cautionary tale, recommending other businesses not follow his initial path of trying to build a marketplace before building a store.
“What is the difference between that? A store would have a small range of maybe 20 to 50 products maximum, something deep and narrow, highly focused that does one thing incredibly well.
“A marketplace asks a lot of different questions about who's coming, how long are they staying, what are they looking for? You must think about all those people.
“I started off that way and I don't regret it because thankfully I've made it work, but I really bit off more than I needed to chew,” Toby admits.
His advice is to test early, start small. Then, optimise by removing things that are not working and adding more of what is.
CUSTOMER ENGAGEMENT AND JOURNEY
Social media is just one aspect of customer conversations. Toby says email is vital because customer relationship management programs now available allow you to tailor conversations you have with customers.
Programs including Active Campaign, Keep, Wavier and Instagram Direct Marketing allow you to map and design and create a customer value journey.
Toby says when you start gathering this information, there is no single content plan or strategy. Rather, he builds it as he goes.
“A lot of the time I don't know what it's going to be until I do the work. But at each stage, I'm always collecting information and content.
“You already know your customer well and the kinds of things they want to talk to you about, so make sure that you're talking to them about things that they want to hear…that's half the battle,” Toby proposes.
ATTRACTION TO TRANSACTION
When building Wanderlost & Found, Toby found himself attracting a different customer avatar or persona than he first anticipated.
“I'm finding that other people are coming to the store and showing much more interest than the people that I had thought of.
“Stay open always, be flexible enough to shift and change, make sure you're always talking to your customer and you're remembering that you're not your customer,” he urges.
It is through talking to the customer about the things they want to talk about that allows you to lead them back to your store and help them transact with you.
When it comes to guiding people to transactions, Toby has found the most effective approach is not telling them what they want.
“That's really a turn off…for anyone to be told what they're feeling or how they feel or why they feel the way.
“I generally start by not talking about sales at all and talking to people about what they care about.
“Engaging them in that conversation and getting them to give me information about very specific things that they're interested in, travel related, food related and all sorts of rich stuff…they're actually telling me, I only want to see this from you.
“What that then tells me is those are the sales opportunities as well because if they're interested in that, I've got products that I could sell to them. I'm going to then take that information to make projections and try and sell them something after that, still relating back to the things they've told me they want to hear about.
FINAL DROP SHIP TIP
If you are planning to use more than one supplier, Toby recommends utilising a good shipping app or plugin that allows you to classify your inventory. Even though you may not be holding physical inventory, you will still want to track stock levels and ensure what you're saying to your customers on the front end in terms of stock levels, matches what's available at the drop shipper.
The inventory management system Toby uses for Wanderlost & Found is Advanced Shipping Rules.
“It allows you to determine collection by collection, where those products are shipped to, how much people are charged, if there are any additional questions you need to ask them about, such as how they're going to receive that package.
“The most practical advice I could give is that you are given an opportunity with drop shipping to excel because so much of that work has been done. Don't think you don’t have to do extra work. Take the extra time to really make something amazing.
“Learn as much as you possibly can about your suppliers, about their products, about how they're shipping systems and processes work because all of that is readily available to you.
“If you have something specific you need to know about those products that aren't advertised on the drop shippers website, ask the difficult questions. There's only one way that you're really going to succeed with drop shipping and that's by standing out,” Toby encourages.
Toby Leon is the founder of Wanderlost & Found; an online store offering ethical and sustainably produced decor and accessories that can awaken your energy and nourish the spirit. He is also a Turbo-traction Lab alumni; a hands-on program designed to build a modern business in 80 days, delivered with a ‘lab’ mindset.
An initiative of the Australian Government, in conjunction with Capital[b] Pty Ltd and Rockhampton Regional Council, Turbo-Traction Lab is a program delivered by the SmartHub.
The SmartHub encourages entrepreneurs and business owners to adopt technology and modern based business practice to make the entire business journey more profitable, more enjoyable, more effective and more efficient.
Being part of the SmartHub gives local business owners opportunities to meet with and learn from mentors, to help them learn the discipline required to succeed in business.
If you’d like to learn more about becoming part of the SmartHub, contact us via the following channels:
Email: smarthub@rrc.qld.gov.au
Phone: 07 4936 8444