Economic challenges caused by the Covid-19 crisis have triggered mass layoffs and closures of many physical stores. In spite of that, online businesses seem to be weathering the storm exceptionally well. Many online businesses adopt a retail fulfilment method known as dropshipping.
In the dropshipping business model, the selling merchant does not handle inventory. Instead, the seller purchases inventory from a supplier and has it shipped directly to the customer. Dropshipping is an increasingly popular model among many retailers today. It’s a lucrative opportunity that is relatively easy to start up and doesn’t require high capital.
If you’re looking to venture into the dropshipping business, here are 4 things you need to know to ensure you are on the right path.
1. Engage with multiple suppliers
Using multiple suppliers can be advantageous in helping you to fulfil all your orders effectively. If one of your suppliers runs out of stock of your items, you can go to another supplier as a backup. Furthermore, it’s a big risk to solely rely on one supplier to source your products. In the scenario that they decide to stop working with you, increase their prices or close their business, your business will be jeopardised.
Although you probably won’t find two suppliers that carry all the same products, there’s a high chance that they will at least stock the best-selling items of your business’ niche.
2. You will have less control
As you’re not in charge of your product stocks, it will be more difficult to handle inventory issues and complexities. It may be especially challenging if you source from multiple wholesalers. You will have little control over:
- Product quality
- Shipping costs
- Customer service
If you’re stocking all your inventory, it’s a relatively simple task to keep track of your stock going in and out. However, when you’re sourcing from multiple wholesalers that are also supplying to other merchants, you can’t predict whether the suppliers have sufficient stock. Fortunately, there are a number of apps available nowadays that allow you to sync your orders with suppliers, so you’ll receive real-time updates on how much inventory your supplier has.
Additionally, you may often have to take the heat for a supplier’s errors. To prevent your business’ reputation from being damaged, it’s essential to have good communication with your suppliers to prevent any potential issues during the shipping and selling process.
3. Outsource your accounting services
Although dropshipping requires little capital input, keeping track of your finances should still be something that you invest in. Many entrepreneurs prefer to keep the bookkeeping in-house, especially when starting up. But this could be a pitfall for your business. Instead, it’s wise to invest in an accounting and bookkeeping service so that you can leave your crucial finances in the hands of qualified accountants. This prevents any discrepancies that will cause trouble for your business.
Invest in a professional audit firm like Ackenting Group to accurately keep track of your business finances and uphold the integrity of your bookkeeping. Our dedicated accountants have years of experience in providing financial services to various companies while accommodating to ever-changing business environments.
4. It’s essential to track your margins
Dropshipping business entails dealing with various suppliers who have unique shipping procedures – thus differing lead times and costs. Since you are dealing with multiple products and suppliers, it’s important to closely track your margins. Tracking your margins helps you to figure out if the profits you earn from particular products are worth the effort of production.
This task can be a challenging one if you don’t have a dedicated eye for numbers, so consider engaging with a reputable company that provides corporate accounting services to do the job for you.
If you require any assistance on accounting services, feel free to drop us an email at firstname.lastname@example.org or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.