How to scale a retail business with DropShipping
The retail industry is enduring a tough time at the moment, even as we’re in quarter four as we write this post – which is traditionally the most lucrative time of the year. But the end goal of most businesses is to make as much profit as possible, which means scaling the business when it is possible, and sensible to. If you’re thinking about scaling your retail business with DropShipping, this is the post for you.
Reasons to scale your business
Increased profits is just one reason to scale your business – although of course, it is the main one. But there are other advantages that your business will benefit from as it grows. The catch with these advantages of scaling your business is that it doesn’t come without significant risks – and we’ll cover these in turn.
Economies of scale
If you’re manufacturing your own products, then you’ll already be aware of the increase in profits due to economies of scale. Essentially, as you produce more items, it becomes more cost-advantageous, and the profitability of the products increases. For businesses that are buying stock from suppliers and manufacturers, they can leverage lower prices when buying in bulk, and therefore have the potential to make larger profits on each item sold, or to lower prices in order to sell more.
The risk with spending more on stock is significant – you’re going to need to invest cash. There’s buying the stock, storing it, and being able to process it, and finding that cash can be difficult. This is where DropShipping offers an advantage if you don’t have cash to spare at present. You’ll be buying each product, one at a time, from your suppliers as orders come in from your customers, and so you don’t need cash to invest in stock, storage, or shipping.
When your business grows, you’ll need additional team members, and so it is pretty likely that you’ll benefit from all their experience too. But when you’re employing additional staff, you have additional costs too, and with that, a lot more risk, especially if you’re taking on staff with less experience so you can pay less – they’re more likely to make mistakes, even if you’re providing them will full training.
Greater brand awareness
Assuming that you’re carrying out marketing activity as you’re scaling, and you’re selling on your website and through social media, more customers will come to know about your business and be more likely to talk about your business, and to use you again. There’s risk to contend with though, since with greater brand awareness comes increased potential for damaging reviews and so on if a customer doesn’t get the experience they want from you – and as you know, one upset customer can impact your business for a long time.
Why choose DropShipping?
During quarter four, or at other times when there is demand from your customers for certain types of products, you have to make the most of that demand. This can be difficult and risky, especially if the products aren’t tested with your customers, cash is already tied up in stock, or if you can’t get sale or return arrangements from your suppliers. Examples include:
- Seasonal products (such as Santa hats) only sell at certain times – leftover stock has to be stored until the following season
- Large items (such as furniture and outdoor decorations) take up a lot of warehouse space – which you could be using for other products
- Perishable goods (such as food, medicines, or plant-based items) have to be carefully tracked for use-by dates – and you may lose stock if it doesn’t sell
Using DropShipping for those larger products, seasonal items, or perishable goods means that you can sell those items without the risk – the supplier takes on the risk. Of course, it isn’t just seasonal products that are worth DropShipping. If you’re short on the cash that you need to scale up by buying additional stock, then DropShipping can help you to scale, to offer your customers more lines, without needing to invest.
Scaling with DropShipping
As an existing retailer, you might have already considered DropShipping for your business. Chances are, you’ve seen plenty of content about it too – whether that is YouTube videos, posts on Instagram, or ads trying to convince you that it’ll make you millions immediately. Those ads can be terribly misleading, because that isn’t usually the case – but done right, DropShipping can be really beneficial to retailers at certain points in the year, or when the business has reached a certain size.
How to scale your business with DropShipping
Scaling your business with DropShipping is relatively straightforward on paper – find a supplier, start selling, right? Well, yes – but it isn’t that simple. Here are the steps you need to take:
1. Find DropShipping suppliers
Finding suppliers that will work with you using the DropShipping model isn’t all that hard – but things get really tricky if you want to work with more than one supplier, because you’ve got to be able to work with all the different systems that each supplier uses. More often than not, suppliers will be using different systems that won’t be compatible with each other, which means you’re likely to need the assistance of a developer, or to handle orders manually, which is definitely not ideal.
When you’ve got a reputation to maintain – especially if you’ve got excellent feedback on review websites – then you need to find the right DropShipping suppliers, with the right setups, and to ensure that your suppliers will deliver quality products, and on the timescales you expect. You don’t want customers lodging complaints with you, or worse, taking to their social media or review websites like Trustpilot to complain – because then other potential customers see those complaints.
Rather than finding and connecting to suppliers individually, you’ll be much more successful by working with a DropShipping marketplace that connects you to multiple suppliers, and doesn’t involve complex technical setups.
2. Source the products that you want in your inventory
Once you’ve found the DropShipping marketplace that has the suppliers and the products that you want, source your inventory. With Avasam, you can select items individually, bulk source all the items in a particular category, or source everything in the Avasam catalogue to scale your business dramatically without the hassle.
3. Take advantage of special offers
Many marketplaces make partnerships with different sales channels, in order to help retailers and new sellers to get off to the best possible start. Avasam is no different, and we’re constantly working to help our users to get the best from their business. Currently, we’re offering a month of Avasam and BigCommerce completely free when you sign up here, and there’s up to £400 of credit for Google Ads when you sign up with our partners EKM.
4. Start selling the products that you’re DropShipping
Start listing your new inventory – Avasam makes this easy, and you won’t need to mess around with CSV files. For major sales channels, you can connect your Avasam account and list from there, and inventory levels will be updated automatically, so there isn’t any risk of overselling and you needing to cancel orders.
5. Assess the success of your DropShipping activity
You’ll have made a decision about how long you were going to try DropShipping for, and so when you get to that point, you’ll need to look at your figures to find out how successful it has been. Check the reporting from your DropShipping marketplace, and if you’ve been using another order management system. From here, you’ll be able to clearly understand how well your DropShipping has served you, and you’ll be able to manipulate the data to show you which sales channels worked best, and which products worked well – and which didn’t.
6. Refine your inventory
When you establish what products are working for you, the ones that aren’t, and seasonal products, you can choose to remove items or not. As the DropShipping marketplace gets new suppliers with new inventory on board, you can source from them too. We’re bringing new suppliers on board weekly, and we’re working hard to bring suppliers that have products where there are gaps in our catalogue, so that retailers can source in all the products they want from us.
DropShipping isn’t always the right move for every business, but it offers significant advantages for retailers at certain times of the year, and in certain situations. Getting started with DropShipping is much, much easier when you find a DropShipping marketplace that offers you the functionality that you need to work with multiple suppliers, and to source thousands of products. Of course, we’re going to tell you that Avasam has all the features that you need for successful DropShipping, including a huge catalogue from multiple suppliers, and we’re hard at work increasing this figure, as well as building new functionality too. Explore what Avasam has to offer your business today by signing up for your free account, and scale your business with DropShipping.