Inventory versus Dropshipping - GO.CO Blog

.CO ExclusiveRebecca Malik is the President at 17th and Riggs, an online source for contemporary furniture and lighting, where she helps you create a fresh, modern space.  Her site has been featured in well-known publications such as Southern Living and online with sites such as the popular Daily Candy. She is a blogger for WomenGrowBusiness.com, where she shares ecommerce and small business management tips.

As an ecommerce site that depends on dropshipping (shipping products directly from the manufacturer to the end user) and keeps few products in storage, inventory management might seem as if it’s someone else’s problem.  After all, dropshipping is all about not handling inventory, right?

There is no doubt that the benefits of dropshipping are high: minimal investment in inventory, low product storage fees and reduced risk of getting stuck with unsold merchandise.  However, to successfully execute, you need to manage both your own inventory (however minimal that may be) as well as closely track the inventory of each of your manufacturers.

Sounds simple, yes, but as a small contemporary furniture and lighting store we carry about 750 products from approximately ten manufacturers.  The availability of each manufacturer’s product changes daily.  Out-of-stock items sometimes take months to replace.  Plus, most of these manufacturers have no built-in way of reporting their current inventory levels or out-of-stock items to you.  You can see how it quickly becomes difficult to accurately track inventory.

Although it is tempting to avoid carrying any inventory, I have tried stocking items to varying degrees.  In one big early mistake, I was stuck with four large floor mirrors that I just couldn’t move (almost $1000 in stock that I had purchased to open an account with a manufacturer).  I resorted to trying to sell them below cost and even posting them on Craigslist.  Nothing worked and the storage fees just kept adding up, month after month.

Finally, I gave the warehouse permission to donate or discard the mirrors.  I was out the cost of the mirrors plus the accumulated storage fees.  In hindsight, I should have done it much sooner rather than sit on stagnate inventory.

Such early mistakes have driven me to carry my own select inventory of items that I expect to move quickly, enabling me to control the availability of certain items.  I do my best to update our site with backorder information and extended lead times and I publicize longer than necessary lead times on stock that can be problematic to stay on top of.   After all, it is greatly preferable to imagine your customers’ pleasant surprise when they receive an item earlier than expected than to have to email them that their much-anticipated package will be delayed.

So, in summary, when managing inventory, I have learned it’s important to do the following:

1) Be very aware of (a) standard lead times for packing and shipping each of your manufacturers in-stock items and (b) how long it will take them to restock products that they have sold out of.  Both can vary significantly from manufacturer to manufacturer.  Note lead times clearly in each product’s description.  Generally speaking, I always overestimate in case of any unforeseen delay.

2)  If available, make sure you are receiving regular stock updates and changes from your manufacturer and syncing it with the product information you are presenting to the customer.

3) Weigh the value of keeping your most popular items in stock against the cost of storage.  It is a wonderful feeling to be able to ship someone their order with just a few clicks of your mouse and not depend on someone else’s timely fulfillment.

4) Realize that your customers assume that everything is in stock unless you inform them otherwise.  Not setting their expectations by giving them complete information is setting your customer and yourself up for disappointment.

By giving visitors complete details up front you are empowering them to make the best decisions for their needs, which ultimately results in a happy customer.

Do you have a product-based business?  Please share your thoughts on how to best handle your inventory and your customers delivery expectations.


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