It’s easier than ever to launch your own e-commerce business and start selling products, even if you don’t want to deal with keeping an inventory yourself. Here are three ways other companies can store and ship your products for you.
With drop shipping, you sell another company’s products. The company ships orders to your customers, which means you don’t handle the products at any time during the sales process.
To start, you need to find a supplier that has products you want to sell and offers drop shipping. Suppliers take a cut of your profits on each product sold and charge a small per-order fee. Once you set up drop shipping accounts with one or more suppliers, you can start selling their products on your own site and sending the order information to them.
Drop shipping is one of the safest e-commerce business models. Since the supplier only ships products when you sell them, there’s no risk of losing money on unsold products. Drop shipping is also scalable because your physical space doesn’t need to expand to accommodate more orders.
The biggest drawback with drop shipping is intense competition. Since drop shipping businesses have low startup costs and present little risk, they’re a popular choice for new small business owners. You also need to sell a high volume of products to compensate for slim profit margins after your suppliers take their cut and per-order fees.
If you manufacture or buy products from vendors, you can send them to a fulfillment company for storage and shipping. There are several fulfillment companies to choose from, depending on how you plan to sell your products and where you need them shipped. Once you send the fulfillment company your products, the arrangement works similar to drop shipping. You forward orders to the fulfillment company, and it ships those orders to your customers.
You pay fees when you use a fulfillment company, but it costs less than drop shipping since you’re selling your own products. You also know how much product you have in stock at all times, which means you don’t need to worry about a product suddenly being unavailable.
Startup costs can be higher because you need to purchase your inventory, and you lose money on unsold merchandise. Even though you’re not storing products on your business premises, you still need to pay to ship them to the fulfillment company.
Fulfillment by Amazon
While Fulfillment by Amazon technically falls into the above category, it has some unique pros and cons. When you use FBA, you send your products to Amazon, and those products then ship through Amazon Prime.
FBA allows you to take advantage of Amazon’s enormous customer base, which saves you money on marketing campaigns to bring customers to the website. Amazon Prime, which offers free two-day shipping, helps to sell your products quickly. Using FBA can be a double-edged sword, though, because you can’t build brand awareness by selling through Amazon, and the fees can also leave you without much profit per item.
FBA does give you options if you want to outsource storage and shipping of your inventory. Even though it takes a higher sales volume because of the lower profit margins, you’re taking less risk and saving yourself time.