Market research
Dropshipping works better as a means to an end, not the end itself. Use dropshipping to mitigate the risk in trying out new products and used for market research. Rather than raising your inventory costs by packing your warehouse with an unpredictable product, test it out with a trial period using dropshipping.
More than just discovering if it sells or not, you’ll also have a better estimate of how much it sells for, giving you a more accurate number of what quantity to buy for your initial stock.
This is doubly important for trying out new product types, which always carry inherent risk. For example, maybe you’ve been quite successful at selling dog products. Would that translate well for cat products too? That could be hit-or-miss, but you can always test the water by dropshipping a few products and see how it goes.
Protection from overselling
Experienced ecommerce brands know that market fluctuations aren’t always predictable. Rather than raising inventory costs by overstocking to meet unlikely maximums, having a dropshipping supplier as a backup saves you money without losing those sales. This is especially useful for seasonal overflow.
It’s a great safeguard against the uncertainties all retailers face. Having dropshipping options in place also makes great insurance against extreme circumstances. If something like a natural disaster happens to your warehouse, you can still fulfill pre-made orders by dropshipping the products from elsewhere. The same holds true for side-stepping surprise shipping delays.
Strategic shipping systems
One unfortunate consequence of expanding your business is shipping complications. The farther out you get from your warehouse or fulfillment centers, the more shipping fees you’ll incur. Dropshipping can be the perfect solution for some problematic locations that fall outside your profitable regions.
Maybe shipping that far costs too much, or maybe storage prices are too high to justify setting up a new shipping center. Maybe it’s an issue of taxes or extra fees, like when shipping out of the state or country. Relying on dropshipping for these select areas could be the determining factor in keeping you out of the red.
Moreover, just as dropshipping can be useful in market research, you can also use it to test new locales. Why not use dropshipping for a trial period in a new location to see if it’s worth opening a new facility there?
High-maintenance products
Some products cost more to stock and ship than others. In certain circumstances, it may be more profitable for you to dropship them versus storing them yourself. What do we mean by high-maintenance products? Any products that necessitate extra fees for storing or shipping, such as:
- Large products — Some products take up so much space, their sales don’t make up the costs of the excessive storage room.
- Heavy products — If a product’s weight makes it cost too much to ship, try dropshipping from a manufacturer or wholesaler.
- Fragile products — Fragile products require special care when shipping. In these cases, the supplier or manufacturer might be better equipped to meet these requirements than you.
- Valuables — High-value items like fine jewelry, antiques, etc., require additional security that not all warehouses can offer. Rather than risking theft, you could leave the storage to someone who can adequately protect them.
- Special conditions — Maybe you want to sell items that need to be kept frozen, or materials sensitive to light. If your inventory needs special conditions, you may be better offering dropshipping than storing it yourself.
Unless your entire company specializes in these types of products, it doesn’t make sense to pay additional storage and shipping fees for a small subsection of your business. But you can still keep your customers happy by offering these products through dropshipping.
