Drop Shipping vs. Selling from a Warehouse

With the rise of e-commerce, the concept of drop shipping has become increasingly popular.

It’s easy to see why.  Drop shipping offers the promise of huge item selection without having to store those items anywhere.  But is it too good to be true?  What are the downsides to drop shipping?

Before we get into that, let’s start with a little history.

The History of Drop Shipping

Though drop shipping didn’t become much of a buzzword till the past 10-15 years, it’s actually been around much longer.  The late 1800’s to be exact.

In 1872, Aaron Montgomery Ward started the first mail-order catalog.  The principle was the same as drop shipping.  Sell the items to a person and ship them directly from the supplier.

No middleman.  No extra warehouses.  This concept would be adopted by countless other companies in the years that followed.  However, many of the companies (Montgomery Ward included) ended up starting their own physical stores, which came with their own warehouses.

However, it wasn’t till recently that drop shipping has really come into the light.  With e-commerce, a business can place items online for sale without actually having any inventory of that item.  Once it’s order, the seller buys it directly from the supplier at wholesale and ships it to the customer.

As great as that sounds, drop shipping comes with some serious drawbacks.

Downside of Drop-Shipping

Since you don’t have any actual inventory, you can’t control what stays in stock.  A customer might order something from you, only for you to discover that it’s sold out from your supplier.

This situation represents the bigger problem with drop shipping.  You don’t have that much control.  You can’t oversee item handling, packaging, or initial shipping.  Basically, your hands are tied, and the quality of your service relies heavily on the original supplier.

Still, drop shipping can be a great starting point for a business until they can get a warehouse and inventory of their own.  This is how Zappos.com started.  But eventually, as they began to emphasize customer experience and satisfaction, they realized they had to drop the drop shipping aspect of their business.

There were simply to many variables out of your control.

If you can find a way to have your own warehouse with its own inventory, we recommend it.  And if you need supplies for that warehouse, we can supply your needs.  If you need to save some money, we even offer a large inventory of used pallet racks.

Do you have any experience with drop shipping?  How did that work out for you?

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