With the advent of the dropship model, many of the risks associated with a traditional retail business have been eliminated. This new model has made it easy for many to start up an e-commerce business.
Suppose you are a budding entrepreneur looking to capitalise on this new business model, it is essential that you have a clear plan in mind before taking the plunge. Here are five tips you need to keep in mind to ensure your business’ success!
1. Find the right suppliers
Partnering with the right suppliers is paramount to your dropship business. Ensure that your suppliers are trustworthy and dependable. As the ones in charge of fulfilling your customers’ orders, your company’s reputation rests on them delivering well-packaged premium products in a timely fashion.
Late deliveries and inferior products can severely damage your business’ credibility. Since the customers are interacting with your online storefront, your business will be the one that is accountable for any mishaps that occurred during a product’s shipping. Therefore, it is crucial to conduct extensive research on your potential suppliers before committing to a partnership.
2. Deciding on your return policy
Before you finalise your store’s return policy, take note of how your suppliers deal with product returns. Suppliers with strict return policies will impact the terms you can offer your customers.
When a customer requests to return the product, it is typically due to a defect. Most suppliers do not cover return postage for defective items. As they are not the manufacturers, they won’t be liable for any defects in their products.
It is advisable to refund your customers for the return shipping fee for any defective goods. This policy can help you build your company’s reputation and leave a good impression on your impacted customers. However, it would be best for your business if you consider the item’s cost. If the product is inexpensive, it may be more cost-effective to ship a replacement to the customer without requiring them to return the defective item.
3. Offer multiple payment options
Prioritise your customers’ convenience by offering multiple payment options. Having more choices reduces the likelihood of cart abandonment, as each customer is likely to have his/her preferred payment method.
Payment security is also a high priority when shopping online. Seeing a familiar option can reassure a customer and let them know that the transaction is legitimate. PayPal, Visa and Mastercard are some of the standard payment options to utilise on your e-commerce site.
4. Understanding chargebacks
It is critical to understand how chargeback works and how it can impact your business. When a customer contests a charge submitted by you, the payment will be deducted from your account, and you will be requested to provide proof of service. If you fail to provide evidence, you will lose the amount due and be penalised with a chargeback processing fee. You could lose your merchant account if you accumulate a high amount of chargeback.
You typically have just a few days to respond to the claim. Therefore, you must have the necessary documents in place as soon as possible. Keeping proper documentation of all your orders and shipping forms can help when faced with a chargeback situation.
5. Keep track of your finances
Despite its uniqueness, a dropshipping business model still shares various similarities with other businesses. No matter the industry or business model, proper bookkeeping is critical to ensure you stay on top of your finances. Managing your various business transaction and presenting these figures in a financial report can be a daunting task, especially for those without an accounting background.
You can consider outsourcing your bookkeeping to a specialised accounting firm. We at Ackenting Group pride ourselves as one of the best audit firms in Singapore. Allow us to offer you our accounting and bookkeeping services to ensure you receive up-to-date and detailed financial reports. A well-documented financial report can help you understand your business’ performance and ensure it is on the right track to success.
Conclusion
A dropshipping business model can be a convenient option for many looking to start their own business. This model has lowered the barrier to entry and reduced the cost of running a company. However, it still requires proper planning and nurturing to turn this into a successful venture, so keep these five tips in mind when formulating your business plan.
If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.
