Last week, I posted about Drop Ship Suppliers versus Fulfillment Centers. Continuing on that vein, when would a home-based business selling products on the web want to use a fulfillment center? To answer that, we first have to look at some of the drawbacks to using a drop ship supplier.
No Supplier – Although drop shipping arrangements are becoming more commonplace, not every line of products has a supplier who will perform this service.
Price Points – Purchasing products through a drop ship supplier carries extra costs, most notably a drop ship fee. This is usually 3 to 5 dollars per order. Depending on margins and the types of products you’re selling, this could stand in your way of making a profit. Furthermore, most products have deeper wholesale discounts when purchased in larger quantities. This type of purchasing can give you a significant competitive advantage that you would not get buying in smaller quantities with drop ship orders.
Product Availability – Using a drop ship supplier, you will be pulling from the same pool of products as every other business that sells in your product line and that also uses that supplier. There is no way to guarantee a level of availably for your customers with a drop ship supplier. This becomes particularly problematic when you’re dealing with ‘hot items’ as they tend to ‘fly off the shelf’.
These factors can leave you with little other choice but to purchase the products in bulk or not sell them at all. And if you choose to buy them in bulk, then where do you store them in a home-based business? One answer: A Fulfillment Center! (To be continued.. stay tuned).
You can read more about how drop shipping is used in a home-based business in Jump Start your Home Business with Real Drop Shipping, Drop Ship Scams, and Leveraging Multiple Drop Ship Suppliers.