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5 Tips for More Cost-Effective Drop Shipping

Clarity of expectations and processes between the retailer and drop shipper is the key to cost-effective drop shipping. By Logistyx Technologies

December 26, 2018

Drop shipping is catching fire in the retail world.

As reported in the Wall Street Journal earlier this year, retailers are increasingly turning to drop shipping as a means not only to offer customers a broader product selection and enhance their shopping experience.

Drop shipping also offers retailers an attractive alternative to reduce fulfillment and inventory costs by relying on third-party suppliers to stock, manage and deliver their customers’ orders.

Drop shipping can be a lucrative additional sales channel for suppliers who want to grow their business, but it’s not risk-free.

For retailers and suppliers, the biggest drop shipping risks take place when customers’ orders are not delivered on time, show up at the wrong address - or worst of all, are not delivered at all.

“Last mile” shipping gaffes such as these occur more often than many suppliers might think, according to Richa Gupta of VDC Research.

Gupta notes that 30 percent of all shipments fail to achieve delivery to the intended recipient on the first attempt.

“This translates into increased costs for delivery service providers and reflects poorly on sellers, resulting in pronounced consumer dissatisfaction,” Gupta says.

“Last mile” errors - which invariably lead to expensive re-delivery charges that can easily wipe out suppliers’ profit on most orders - typically occur for one or more of these reasons:

  • Delivery delays due to high traffic and congestion in urban areas
  • Incorrect addresses that route the delivery driver to an incorrect location
  • Signature requirements not being met if/when the recipient is not at home at the time of delivery

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