While the appeal of having hundreds or thousands of quality products at wholesale prices waiting to be boxed and dropshipped to our customers without the hassle of handling the storage, packing, and shipment of the products sounds like a dream come true, it could also be a liability.

There are numerous reasons to look to dropshipping as a preferred method of product fulfillment in today's eBiz frenzy, for starters, dropshipping allows the internet entrepreneur to start an eBiz with a much lower initial investment than a typical brick and mortar retailer.

• Usually there are no minimum order restrictions on dropship orders like there are on traditional wholesale purchases. Some wholesale suppliers require minimum first orders to the tune of $5,000.00 or more and may require minimum monthly re-supply orders of $1,000.00 or more.
  
  
• No product storage or fulfillment costs. Nope, you don't need to rent or buy a warehouse facility or jam your spare room full of hundreds or thousands of products. Nor will you have to rummage through your well organized product to locate, pack and ship the product. Some potential business owners may overlook significant cost savings due to eliminating the time it takes to handle product fulfillment.
  
  
• No shipping material costs. Your wholesale dropship supplier has already purchased the cardboard, bubble-wrap, and shipping tape. They'll take the time to (hopefully) carefully wrap, pack, and ship the item to your customer and most of the time they will even use your brand label so the customer thinks the product was shipped by you.
  
  Don't think you'll get off completely scott free here though, most wholesalers that provide dropshipping will charge a fee for the service. A typical dropship charge is $2.00 per order shipped to the same address, but make sure you are clear on the costs up front so you aren't surprised in the event the dropship fee is applied per product.
  
  

So with all these benefits how can there be any risk. The unfortunate fact is that some of the same reasons you are drawn to dropshipping can turn out to bite you if they aren't executed properly by your dropshipper. Some of the potential pitfalls:

• Poor inventory management and reporting - Since you don't physically have the product on hand when you sell it, you are actually taking the risk that your dropship supplier might not have the item in stock when you place your fulfillment request. No matter how you handle it, you're going to take a hit with the customer. Make sure you do some due dilligence on your prospective dropshipper's inventory management, inventory reporting accuracy, and customer satisfaction before you enter into a potentially damaging relationship.
  
  This can be especially troublesome if you are selling on eBay. Make sure you do your research on eBay's dropshipping seller policies and be sure to inform your potential bidders when product fulfillment of any auction items you list are not within your control. This may be the single difference in whether or not you receive negative feedback for any transaction that isn't completed in a timely manner due to a back order status with your supplier. I've also heard that eBay has disabled accounts for repetitive failures to deliver products put up for auction.
  
  
• Slow order processing or shipping - Customer satisfaction is closely tied to timely delivery of products ordered online. So, if your dropship supplier is chronically slow at processing and shipping your orders, your customers will be inclined to look elsewhere. Make sure you know what the average order processing and handling times are up front.
  
  
• Incorrect items shipped - Another sure fire way to create unhappy customers is to ship them the wrong products. There isn't much more dissapointing than anticipating the receipt of your item only to open the box and find something else. You almost feel betrayed, and immediately become angry at the mess you're going to have to deal with to get the product exchanged. Instead of hopping in the car and driving to your local department store to conduct an exchange, you are now forced (in some cases) to contact your seller for an RMA number and will most likely end up having to pay an extra shipping charge for the return trip to the seller.
  
  Note: Here's a chance to be a real hero and win some serious points in customer service ratings: pay for the return shipping! After all, it wasn't the customer's fault that they received the wrong item. Why should they be expected to pay more than they should to get what they ordered in the first place. This can be done by issuing a credit for future purchaes, which if you think about it is a good marketing tool in itself, or by issuing a credit to the customer's credit card.
  
  
• Returns - We kind of touched on this above, but there is more to consider when your customer wants to return an item for some reason. If you don't want additional sales or repeat business you can simply not accept returns, but if you would like the opportunity to have an ongoing relationship with your customer, you better offer them the ability to return items and if you're looking for the best possible customer satisfaction rating you'll offer the ability to return items for any reason at all.
  
  Now, you can't obviously take it on the chin any time a customer changes their mind here, so you need to make sure you are compensated for the fees you'll have to eat when a customer makes a return for a reason other than recieving the incorrect or defective item. This is typically done by requiring a restocking fee to be paid on returns of a personal nature. You would also not typically offer a shipping rebate in this case.
  
  The problem herein lies in the fact that in a typical dropship situation you are trying to give the customer the impression that the product came from you and not your supplier. To maintain this impression, you'll have to be on the receiving end of the return and facilitate the replacement to the customer and the return of the product to your supplier. Hopefully your dropship partner will accept returns for non defective or incorrect items and you won't have to eat the cost of replacing the item. If this is the case, you not only have to eat the costs associated with the return, you now have a product you need to move in order to recoup those costs.
  
  
• Poor brand recognition - You've worked hard to get that sale, so why would you want your wholesale dropship supplier to confuse your customer by having their name show up on the invoice/packing slip or the ship from address on the package. Again, make sure any potential wholesale dropship supplier is capable of branding with your company or personal information before establishing a relationship with them.
  
  

This information wasn't provided to discourage you by any means. Dropshipping is still the best way to offer a large number of products to your customers without the hassles and costs associated with stocking and fulfilling the products yourself. When used in conjunction with other product sourcing and fulfillment options, dropshipping can be an effective part of a successful online eBiz.

Wondering what to do next or where to start? We recommend the top rated internet dropshipper now touring with eBay Live. Get started with a free trial today!