Dropshipping is mostly known for it’s hands-off approach to fulfillment. That’s the main appeal to many (justifiably) fulfillment-averse merchants, but its benefits aren’t restricted to just that.
A lesser-known and more inventory-centered perk to dropshipping is product testing. It’s all of the fulfillment appeal to dropshipping without the commitment of buying inventory. But it’s heavily reliant on customer feedback.
Mitigating the Risks of Inventory
First thing’s first, dropshipping is a method of fulfillment where a merchant simply sells a supplier’s products. Once the merchant makes a sale, the supplier — who stores and handles the product — fulfills it. For e-retailers, it’s all the joys of online sales and marketing operations with none of the pack and ship drudgery.
Other than that hands-off fulfillment, a primary perk is not having to store inventory. Nothing is worse than watching inventory sit around collecting dust. You invest a substantial amount of capital into beautiful, promising products hoping that they’ll one day turn into respectable revenue. But sometimes they end up sitting around, dragging down your business’ revenue-rich hopes and dreams.
Dropshipping offers the opportunity for e-retailers to test new products without the risky investment in inventory and without the added headache of fulfillment. By using the model to test new products, those that are duds won’t leave you with cash tied up in inventory. Simply stop offering the product and selling it for the dropshipper.
Does it sound too good to be true? Rest assured, you’re definitely able to test products easily, but the dropshipping model does have its drawbacks. For more on all those downsides, take a look at this dropshipping blog post.
What’s on the Customer’s Menu
The strongest new product you could possibly offer to your customers is one that they suggest themselves.
And for that, we need some ever-invaluable customer feedback. A customer-recommended product is revenue waiting for you. Chances are, if one of them expresses interest, there are a handful of others that would put some money down on the product as well.
To prevent them from heading over to a competitor or loading up Amazon without letting you know of that product, you need to collect that feedback in the first place. You can go about this in a variety of ways – it depends entirely on how you want to communicate.
Social media – Throw out a post asking for any sort of products your social followers would like to see. It’s an open and easy way to collect feedback, but it does risk alerting your competition to the same new product as you. You don’t want them to know what you’re up to.
Email blast – Have a select group of passionate customers that can’t get enough of your brand? It may be useful to specifically target this group with a generic email blast that asks them for product recommendations. Combine your standard email service provider, like Mailchimp, or the basic functionality of your sales channels with a custom-made survey from services like SurveyMonkey to accomplish this.
Post-purchase surveys – To get a broad and secure look at what your customers may be interested in buying, a post-purchase survey is useful. Some tools are out there that allow you to send customizable, post-purchase surveys gauging typical criteria (how satisfied are you, how likely are you to recommend, etc.). That’s where you can ask them specific questions related to the product ideas.
Here are a couple of useful ones to give a shot:
Try the Buffet
Whether the customer suggests a product or you’re just on the hunt for one, you’ve got to find a dropshipper to put it to the test.
Rather than looking for new products straight off the menu that your customers provide, you can go the buffet route. Resources are out there to help you choose from an entire medley of products offered by an array of wholesalers and dropshippers. You can find a random product that may match your brand and target customer, or you can hunt down a product similar to the ones recommended by customers.
Here are some dropship catalogs you can sift through. The websites listed here collect known wholesalers and dropshippers for you to vet:
Each of these sourcers has their own pros and cons – be sure to read up on each, see if their fees fit your budget, and try a couple out to get comfortable. Some offer a broader range of products, others have useful market research tools to help you hone in on a product to try.
Once you take a look at dropshippers’ products, eyeing some that you think your audience make like (recommended or not), consider reaching out to your most loyal customers again to measure their interest in such a product. If they’re into it, it’s probably worth a try.
Testing 1,2,3
Remember, you’re test driving these new products, so it’s important to analyze performance in case you want to commit to buying more inventory or fulfilling yourself. Does the product have an element of seasonality to it? Are promotional efforts showing an impact in sales? Before delivering judgment, take all sales-affecting factors account, not just sold units. You need to be positive that the product is capable of selling itself over time without relying too much on promotional and time-sensitive factors, like discounts, flash sales, or trends.
Based on sales volume, you’re naturally going to have some awareness of how effective new products are, but go a step further: it’s feedback time, once again. Survey your customers post-purchase as well. If not to ensure that the product meets their expectations, then to ensure that the fulfillment process of your new dropshipper is satisfactory. Dropshipping means less control, especially at this experimental stage, so if things are looking swell, you can trust the dropshipper or buy up and fulfill inventory on your own instead.
Report Card
Once it’s all said and done, how did your darling new product do after a given time? Compare it to the sales of your existing product catalog as a baseline and make a decision on whether to keep dropshipping it or bring it on board.
High-performance
So the freshly tested product performed exceedingly well, surpassing some of your best-sellers. It’s clearly a keeper.
Now you get to make the decision of whether to keep it dropshipped or buy up inventory for yourself. This is more of a financial decision on your end. Are you willing to tie up your cash in inventory? Do you trust the product to reliably sell in the future? Or maybe the dropshipper you’ve been working with it top-botch, so you’ll stick with ’em. Do what’s best in your situation.
Average-at-best
Let’s say the product got off your dropshipper’s shelves, but it wasn’t mind-blowing – it was on par with the average amount of other products sold.
“Eh” results means this the product’s performance is up for interpretation. A little marketing magic could bump sales up, so you may just want to keep dropshipping it, so long as the fulfillment process has run smoothly and efficiently. But everyone wants an “A” on the test, so maybe it’s best to look for a product that truly intrigues your base.
Underperformance
If your customers couldn’t be bothered to buy the product, it’s all good. The point of this entire experiment was to test.
The best part is that you can still offer the product if you want. You aren’t storing inventory or handling fulfillment. The product just gets to sit with your dropshipper for a while longer as customers gradually buy it. No loss! Or, you can let your dropshipper know you won’t be selling the product any longer. It’s your call.
Images: Jared Tarbell, EthoSource, Flickr
