Manage Your Drop Shipping Business From China With Success
Retailers, distributors and entrepreneurs are increasingly considering drop shipping from China to increase the number of products they offer, minimize the inventory they carry, and reduce order cycle times. If you have never heard of dropshipping you might have a look at this infographic that we shared recently or checkout the image below for a summary
While drop shipping (sending goods directly from the supplier to the customer), has been going on for quite a while, it can get more sophisticated when sourcing from China if you are working with the wrong dropship company. Drop shipping is an attractive proposition, but it also puts the customer service proposition into the supplier’s hands. Without visibility into the complete customer order-to-delivery cycle, retailers and distributors run the risk of brand damage. To solve this problem, companies have to rely on dropship service companies such as Chinavasion, who have a in house quality control and logistics team that can take care of orders efficiently. Since it is highly unlikely that customers know that the goods are coming from the supplier instead of the retailer/distributor; close coordination and visibility into the progress of the order is critical.
It’s amazing how many companies still manage this process with spreadsheets and a phone. This approach does not provide the insight needed to manage exceptions as they occur. Nor will it scale as the business grows. Considering the number of key events that need to be tracked for each order line item, it doesn’t take a lot of business before there are hundreds of thousands of data points each month to sort through. In addition, data integration with suppliers needs to move from manual to automated processes just to keep up with the volume and free key resources to focus on value-adding activities. Chinavasion is therefore working on an API at the moment that will automatize the product listing and order processing part, so that companies can focus their resources on marketing and sales related activities. This API is expected to be ready in September 2014. To stay up to date regarding this topic, make sure to subscribe to our newsletter.
Are you considering to enter the dropshipping business? Or are you facing challenges? Here are seven keys to improve your drop-shipping practice:
Choose your products
While the supplier might offer you a wide range of products, you have to decide yourself if you want to focus on a niche or offer the whole catalog. This will depend on your expertise and the way you do marketing. Focus on a niche could make you look an expert in this niche, while offering a lot of products will make you appear like you are a big player in the market. An example of a niche market that is highly profitable is for example the market of security devices. Chinavasion as many customers who focus only on this category and even though their product quantity is low, the average sales per model is high. Other drop ship customers go for a more broad selection offering phones, tablets, TV boxes and our cool gadgets. Whatever you do, make sure to align your offering with your brand/reputation.
Choose milestones that can be used as control points.
Start with the most basic set of milestones. The tendency is to try to capture as much data as possible, but most companies struggle getting it all from their suppliers and don’t necessarily know what they will do with it all. Recommended milestones for drop shipping are:
- customer order date and promised delivery time frame;
- order forwarded to dropship company date
- delivery notice by dropship company date
- delivery notice forwarded to your customer date
- order received by customer date
Implement actionable and periodic performance reporting.
The organization will use actionable reporting to control the drop-shipping process. Actionable reporting focuses on exceptions and critical statuses. For example, actionable reporting should track response times by suppliers, not just milestone details. If a customer order is sent to a supplier, the supplier should have a limited time window to respond confirming the order. We at Chinavasion for example ship products within 1 working day by making sure that all products offered online are in stock.
Actionable reporting should be exception-based to allow resources to focus on the orders that need attention. Performance reporting takes a longer term view (week/month/year-to-date) to track the supplier’s performance consistency and whether it is trending better or worse.
Ensure that the supplier has a in house quality control team
Don’t assume anything here, even for large well-known China websites, mostly they simply source and ship without proper quality controls. Find out whether a Chinese dropship supplier. Quality and delivery performance and supporting technology vary widely. Many manufacturers focus on low cost as opposed to delivery service quality. Extensive use of third parties, which is not bad in itself, makes the supply chain even more complex to control. When you drop ship from China don’t arrange separate logistic companies to take care of order processing, that will make the situation hard to manage. In stead, find a company that has a well streamlined logistics and order processing practice. Make sure to evaluate the supplier’s product quality, logistics and technology capabilities to make sure they can consistently deliver.
Don’t let the information get stuck in supply chain operations.
Immediately share it with suppliers. It will help them understand what they are really providing. Once satisfied with the quality of the data, share it with the customer service organization and, ultimately, with customers. For complex goods and especially those with longer lead times, the “where’s my stuff” question comes up frequently. There is no reason not to automate this process and turn it into a value-added service for customers, as opposed to a potential frustration. This can also improve the productivity of the call center and sales organizations.
Use technology to automate and disseminate
Two of the biggest challenges are collecting data and data quality. Logistics networks are well-suited for automating this work because drop shipping is a multi-party process and networks operate in real time. Implement a visibility solution that can model the supply chain milestones and has the flexibility to change as more is learned about the drop-ship supply chain. Visibility solutions effectively link the statuses of the life cycle of an order and provide the basis for reporting. Because establishing visibility into drop ship activities requires data sharing across the parties, choose cloud-based solutions.
Drop shipping provides a compelling way to expand a retailer’s or distributor’s market reach. However, without effective visibility tools in place to capture statuses and provide actionable insight in real time, retailers and distributors are “flying blind” with respect to their supplier’s delivery performance impact on the most valuable thing they own – their reputation.