Scaling Past Uncertainty with This Winning Supply Chain Strategy (Shopify Dropshipping 2024)
At some point in your e-commerce and dropshipping journey, you might hit a roadblock when it comes to supply logistics. Today, we're here to illuminate the path forward for three types of e-commerce entrepreneurs at different stages of their adventure.
Finding the Winning Product
To be real, if I were launching a new e-commerce or dropshipping store tomorrow, I wouldn't necessarily dive into the methods I'm about to spill in this phase.
These methods for fulfillment aren't perfect, but their whole gig is about putting your products to the test! Don't let things spiral to the point where refunds, partial refunds, or shipping-related hiccups bother you. Refund may undoubtedly sting at this phase but it's a tiny hurdle compared to the mountain of success waiting for you once you hit the scaling phase.
AliExpress
The star of this phase? AliExpress! It may not take the crown for being the absolute best. Example; a multitude of sellers, many of whom are fellow dropshippers from China catering right to their customers. Why do fresh-faced drop shippers adore AliExpress? Let's break it down:
Low entry barrier — You can begin by purchasing just one product at a time. Additionally, you have the flexibility to wait until your customers initiate orders before making purchases on AliExpress.
Wide Range of Products — A diverse array of products is available due to the extensive number of sellers, offering a wide selection for customers to choose from.
Wallet-friendly — It remains cost-effective due to the ability to mark up prices on AliExpress even upto four times. In many instances, a Western audience is willing to accept these prices provided the marketing and branding are strong.
But do note that AliExpress isn't flawless and you should brace yourself for slow shipping times. You might even need to manually fulfill orders unless you've got nifty apps like Auto DS or DSers to semi-automate the process. Additionally, if your customer orders a couple of products from different suppliers, they might not receive them in the same package or at the same time.
CJ Dropship
If AliExpress isn't your cup of tea, fear not! There are other platforms like CJ Dropship in the mix. Now, these platforms aren't your typical dropshipping agents—they're more like your ultimate sidekick.
Picture this: you've got customer service agents dealing directly with you instead of the suppliers. They operate behind the scenes, juggling a network of suppliers in China to serve up a variety of products.
Opting for one of these platforms means you'll still enjoy a low entry barrier and a vast array of products. Extra perk: Speedier shipping times when you compare it to AliExpress!
But here's the deal—they might be a tad pricier but you'll have a customer support agent at your beck and call. Although, their capabilities might be up for debate when things go awry.
Alibaba
And the last option, sourcing in bulk from Alibaba. I made this move when I kicked off my e-commerce journey, and honestly, it was a major slip-up.
Here's an idea: Grab bulk items from Alibaba, have them sent to your spot, and handle fulfillment yourself.
Now, personally, I wouldn't take this route. It's like pouring a ton of capital into products without a guaranteed win. But I'm tossing these out there for the curious minds! Believe it or not, some folks have hit the jackpot by diving straight into Alibaba, and that leads us right into Phase 2!
Approaching Fullfilment Method
Get ready for the exciting part—it's time to scale things up! As you dive into the world of consistent sales, it's all about choosing a fulfillment method that can keep up with your growth. Now that you're in the groove, it's safe to bulk order products and stash them somewhere. Imagine having orders fulfilled in hours, not days, after your customer hits that order button.
The choice between the two options I'm about to unveil depends on how much you're willing to invest in inventory.
Think of this scenario: you stick to the Alibaba strategy I mentioned earlier, shipping products to your personal in-house fulfillment center (which is basically your own space), and take charge of the fulfillment or enlist a friend or family member to lend a hand. This way, you save big on fulfillment fees. But, there's a catch:
You'll spend more time on fulfillment when you could be focusing on growth strategies like marketing and branding.
You're limiting yourself to your own fulfillment capacity.
That said, lets explore these options and take your business to new heights.
3PL
Consider a nearby 3PL (third-party logistics) provider. Instead of shipping from Alibaba to your own fulfillment center, you'd send it directly from the supplier to a local logistics company. They'll handle order fulfillment and send packages directly to your customers. This way, you still reap the rewards of super speedy deliveries without getting caught up in the fulfillment process. This frees you up to focus on scaling your business!
Yet, this method does come with its set of hurdles. To keep costs in check, you'll need to bulk order a substantial amount of product from Alibaba. This means a significant chunk of your cash will be tied up in inventory until those products hit the road to your customers. Plus, managing your inventory becomes a juggling act—you'll need to keep tabs on product sales speed and lead times.
Imagine it's January 1st, and you're in the sunglasses game, selling 100 units per week. Now, let's say it takes a month—between production and shipping—to get your bulk product from the supplier to your 3PL. That means 400 units sold in a month, and assuming you had 400 units at the start of January, they'll last until the beginning of February.
Now, how do you avoid running out of stock before February rolls in? If it takes a month to get the product, you'll need to buy another 400 in January for arrival by early February. Essentially, you're ordering 400 units a month in advance, which won't even start being used until a month later.
Some might think, "Hey, let's secure enough product for February too!" So, they buy 800 units of sunglasses, ensuring they won't run low even if there's a sudden spike in sales in January.
But here's the twist: Having two months worth of product tied up in inventory can strain cash flow for some companies. Keeping tabs on inventory levels in this scenario can become a bit of a headache. Sure, some businesses roll with this approach, but there's an alternative: partnering up with a Private Agent in China.
Private Agent in China
Shipping times aren't lightning-fast like local ones, but Private Agents are still pretty swift. Here's the real win: lead times are impressively short because products go from supplier to our warehouse in days, not weeks.
Now, for anyone who's managed stock with different 3PL setups outside China, they'll understand the game-changing impact. You don't need to stockpile as much inventory in advance, freeing up your capital. Plus, sudden shifts in sales won't catch you off guard. Why? Because your agent is right there in China, where all the other suppliers hang out.
Managing High-Volume Orders
If you're diving into high order volumes, these next three options are directly tied to what we just covered. If you've jumped ahead and things seem a bit fuzzy, make sure to check out the previous section for a clearer picture!
1st Option: Establishing In-House Fulfillment Centers
Now, diving into the first option—creating in-house fulfillment centers in each country you're operating in. If you're already at this level, you might not need advice from me. There are clear advantages, like leveraging economies of scale and potentially reducing costs significantly compared to using a third-party logistics provider not managed by your company. However, it's crucial to recognize that managing fulfillment in-house demands a considerable amount of resources and management. It might not be worth the effort if your business hasn't reached that scale or level just yet.
2nd Option: Partnering with 3PLs Across the Globe
Let's explore the second option—joining forces with 3PLs across multiple countries. This choice shares both the advantages and disadvantages we previously discussed. The drawbacks multiply based on the number of additional 3PLs you engage with across various countries.
On the bright side, you'll still enjoy the perks, like lightning-fast shipping times that keep your customers smiling. However, managing inventory for each 3PL means investing more time and resources. This might also heighten the chances of facing cash flow issues since you'll need to store or pre-purchase products for multiple 3PLs in different countries.
If you prefer steering clear of these challenges, consider leveraging a versatile private agent in China. They offer swift worldwide shipping, saving you from tying up excessive cash in inventory.
3rd Option: Embracing the Hybrid Approach
Now, picture the best of both worlds with the Hybrid Model—an enticing option worth considering! Here's the scoop:
Example having a private agent in China while also collaborating with local 3PLs in the primary country where most of your customers reside. This approach, in my opinion, is a win-win for several reasons:
You mitigate the risk of inventory shortages while ensuring lightning-fast shipping for local customers, thanks to your nearby 3PL. This means exceptional shipping times for your local customer base.
Your Chinese agent steps in for cost-effective and still fairly quick shipping globally. Plus, if your local 3PL unexpectedly runs out of stock, your Chinese agent becomes your reliable backup. You can swiftly dispatch products to customers in the country where the 3PL ran out of inventory.
It's the perfect blend, ensuring optimal shipping times and minimizing the risk of inventory shortages across the globe!
Remember, whether you're testing the waters or scaling to greater heights, finding the right fulfillment method is key. It's not just about what works now, but what sets you up for success down the line. Keep exploring, stay adaptable, and trust your instincts. Cheers to your e-commerce journey ahead—may it be filled with growth, success, and loads of innovation!
Ready to take your e-commerce game to the next level? Read more about our: Dropshipping Agent Service here.
