Businesses all over the world are trying various strategies to improve the profit margin of their e-commerce business. As online business is relatively new compared to the traditional way of buying and selling, people are using new innovative methods to improve their business by controlling the cost. There is a wide range of methods/strategies that companies use to reach out to their target audience and sell them the product they are looking for. One such method that has attracted a lot of interest among online companies is the drop surfing e-commerce method. Before we understand the pros and cons associated with this method, we need to first understand what is it?
What is drop surfing e-commerce?
In layman’s term, drop surfing can be termed as a refined variant of drop shipping. In this method, you are selling trending products of other suppliers at great prices. To explain to you in simple terms, if you’re selling some products, then you can look at five or six different suppliers with great rankings in the market. Then you can check their prices and choose one that offers you the product at a great price point (less shipping charge, easier method, good reputation and discount on the product). This will help you to maximise your profit. In case, the supplier increases the price of their product, then you can simply go to another supplier who is selling the same products at a lesser price. Just like drop shipping, in drop surfing the online store does not see any product that it sells through the online route. What it does is purchases the product that a consumer has selected on its online retail shop from a third party (selling the product at the cheapest price) and directly ship it to the customer. In this process, the merchant actually never even handles the product which it is sold through its online website or eCommerce app.
While at first glance, it looks quite convenient to not hold any stock (it reduces the logistic cost) and also maximise their profit by always choosing the supplier that is selling the product at the cheapest price. However, if you dig a bit deeper into this strategy, you will find that this method has both its pros and cons. If you want to adopt this method of selling goods on your e-retail shop, then we suggest that you look at the advantages and disadvantages and do a cost benefit analysis to see how profitable this method is for your business.
Advantages of using the drop surfing e-commerce method to promote your business
1). It has a low start-up cost: One of the biggest upsides of using the drop surfing eCommerce method is that you can start your online business on a shoestring budget. You don’t have to spend too much money on buying all the inventories, but simply contact the third party seller and provide the link in your online retail shop, which will allow you to sell the product directly from the third party stock at the most competitive price and not face hassle of maintaining stock at your end (and paying a huge amount of money on it). You only need to pay the cost of eCommerce website development or eCommerce app development depending on your planning.
2). Open your retail shop faster. The reason is that they don’t have to buy different kind of products that they wish to sell on their online store. Additionally, they are able to keep their operating cost very low by avoiding expenditure on storehouse, packaging those goods, keeping a track of the inventory, and shipping the goods. Since in drop surfing e-commerce strategy you don’t have to follow any of these steps, you can start your business in a flash.
3). Saving on overheads: The overhead cost also reduces considerably as you don’t have to pay a huge amount of money for stocking your goods, paying salary to your workers working in your warehouse and packaging the department.
4). Get a flexible location for shipping of goods: This method allows you to the option of using flexible locations to sell your goods. As you are not storing any good in your own warehouse, you can simply connect to any third party in any part of the world to sell their goods through your store. Therefore location is not a big issue for you.
5). Provide a wider variety: It allows you to offer a wide variety of products to your customers. Since you are not investing a huge amount of capital in buying inventory, but are depending on third parties to sell their products to your customers, you get the option of selling a large number of products through your easy retail website.
6). Scale up your business: This method allows you to easily scale up your business by simply adding new third parties to your list of suppliers whose goods you can sell through your own online website or mobile app.
7). You are selling trending goods: In drop surfing, online retailers mostly sell those goods that are trending. Therefore, you have a great demand for your product which ensures that your business remains viable.
Disadvantages of drop surfing e-commerce method
While this method gives you several advantages, there are certain disadvantages associated by following this process to expand your online business.
1). Fall in share margin: Since you have to share your profit with the third party whose product you’re selling through your online store, your margin remains very low (even when you are buying from a supplier that is selling the product at the most competitive price in the market) ,which can affect the viability of your online with business significantly.
2). No control over inventories: If you have your own inventory then you can easily keep a record of them with yourself and know which one of them are in good supply and which are not available. Therefore, if you to display a product is available in your website or app, but when you contact the third party to supply that particular product and they show their inability to do so due to either limited stock or not available, then it can have a serious impact on your online business reputation.
3). A complex shipping process: When you contact many suppliers to sell their product(s) through your store, then it will become sometimes a logistical nightmare when different suppliers use different shipment options and it becomes difficult for you to keep a track of all the products sold to your store on a real-time basis.
4). Mistakes of the suppliers impacting your reputation: Since you are selling the product through third party suppliers, there is a possibility that they might make some mistake either in the shipment, the product or the cost. Any mistake from their site will have an adverse impact on your market reputation as good online retail.
Wrap upSo, you have seen that drop surfing method has pros as well as cons. You need to figure out your own situation, if you do not have financial problems then its wise to avoid drop surfing and vice a versa. The primary factor for an online business is its website or mobile app. If you have chosen to build an eCommerce app then don’t miss to read these guidelines of an eCommerce app by Guru Technolabs.