The goal of any online retailer is to effectively scale their business as revenue grows. However, scaling your operations can present some unique challenges.
Can your company handle the increased fulfillment duties? Do you have enough resources to expand your product assortment variety? Can you still provide high-level customer service with your expected growth?
All of those are valid questions to ask. After all, as you scale, your increase in revenue will need to be used to grow your teams to help maintain your current level of customer service and fulfillment functionalities –– even if or when you have a much larger customer base and product catalog.
For many companies ready to scale, but not yet ready to invest in additional hires and training materials, especially before a high traffic period such as the holidays, dropshipping can effectively grow your product assortment without an increase in overhead costs.
How exactly can dropshipping work as a scaling accelerator for small businesses? Let’s take a look at a few examples of unconventional drop shipping strategies that can help you find profitable opportunities.
With the traditional retail model, increased product sales means more pressure on your fulfillment teams. More products will need to be packaged and shipped quickly, which most likely means you’ll have to hire more people and expand your fulfillment teams’ operations. In the end, a successfully growing business isn’t just about closing an increased number of sales and making an subsequently increased revenue. Without acknowledging the additional workload and strain on bandwidth of your current employees, you’ll lose out on customer experience as well as begin to see a high churn rate among your workers.
“Scalable growth is all about pairing exponential revenue growth with incrementally increasing cost,” wrote Jason Albanese, co-founder and CEO of Centric Digital, for Inc.com.
For a growing business, if your revenue isn’t yet capable of producing the ROI needed for additional hires in the fulfillment department, dropshipping is a cost-effective solution to help you bridge the gap between start-up and fully functioning big box brand — all without causing an employee sentiment shift in regards to your company.
With dropshipping, your dropship supplier owns all the fulfillment for their products that you sell on your store. You still have to spend money marketing and merchandising the products you choose to add via dropshipping, but that cost is far less than hiring more people to handle the increased fulfillment workload. Then, once you prove out the expanded catalog concept and see ROI from the initiative, you can begin to pull products in-house, expand your teams and continue to grow effectively.
Product testing is another challenge retailers frequently face. When you’re looking to expand your product catalog, you want to add products that your customers will be willing and eager to buy. However, finding those products can be a challenge.
All retailers pull in products they expect to fly off the shelf –– but not all of them do. This is a constant trial and error for retailers and merchandisers no matter their size. For a quickly scaling small business, however, expanding your inventory only to see a few product sell well isn’t efficient merchandising management. This is where dropshipping can help.
With this dropshipping strategy, you can offer products to your customers without purchasing inventory or dedicating valuable warehouse space to a product you’re not even sure will sell well.
Since the monetary risk of testing a new product is removed with the dropshipping model, that frees you up to spend a bit extra on marketing these new products to gauge your customers’ interest in them. If the new product sells well, you can then purchase an inventory of it to help increase profit margins and overall business revenue.
Long-tail products are those which sell in a lower volume, but are still popular enough that you want to sell them in your store. The problem with long-tail products is that it’s harder to move an inventory of them, and stocking too many can take up your valuable storage space. Instead, you can dropship those products, allowing your customer the access they want without the warehousing issues that often accompany those items.
The same goes for seasonal products like Halloween decor or Christmas stocking-stuffers. It doesn’t make sense to keep these items in storage year-round, and it can be tricky to predict how many of these kinds of products you’ll sell in a given year. Dropshipping gives your customers access to as many products as they can buy, and when the holiday season is over, you’re not on the hook for the large inventory that you didn’t sell.
In all, dropshipping can be an effective scaling tool for online retailers looking to cost-effectively expand their product offerings and operations.
(It’s also a great place to begin – learn more about starting a dropshipping business from Modalyst)
Think of dropshipping software as a tool to A/B test new inventory, increase average order value with long-tail or seasonal products and help make the business case for increasing your employee headcount without causing churn. It is possible to scale your business quickly and efficiently –– and dropshipping can be a key tool in your business’ growth arsenal.
Learn more about various shipping strategies to grow your business and visit our Complete Guide to Ecommerce Shipping.