eCommerce Lifestyle
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Dropshipping Inventory Issues

How To Deal With Inventory Issues When Dropshipping

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The biggest issue when it comes to dropshipping is not being in control of inventory.  In today’s episode of the eCommerce Lifestyle Podcast, Anton shares how to resolve it.

The podcast is also available on all major podcast players including, Stitcher and Spotify.

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Transcript

Hello, everybody, Anton Kraly here. And welcome back to the eCommerce Lifestyle Podcast, our bi-weekly show designed to help e-commerce store owners to increase their revenue, automate their operations and become the authority in their niche. In today's episode, we're going to be talking about exactly what the title says, and that is how to deal with inventory issues when dropshipping. Now, before I get into this and share what you should do if you want to be able to get sales and actually make money when suppliers are out of stock, I do just want to say this isn't a new topic. I did an episode on this probably four years ago, and I also recently, over a year ago now, recorded a playlist called dropshipping during a pandemic. And I have a video there that goes deep into what we did when suppliers were really dealing with inventory issues.

But now that we're dealing with this next wave of the Rona and things are getting locked down in China again, we don't drop ship from China, but a lot of our suppliers products come from China to the States and warehouses, certain suppliers are experiencing inventory issues. And when you're dropshipping, that means you are too, which led me to creating this episode just to make sure every new listener or anybody that might have forgot what we talked about in the past knows what to do when you get your inventory sheets from your supplier, and you see that some of the best sellers are either very low on inventory or they are sold out and the ETA might be far in the future for the next shipment. Now, this is something we obviously do have to deal with as dropshippers. Because we're not typically pre-purchasing products, we don't have any rights to products in a supplier's warehouse. So if they simply sell through what they have, then a lot of the times we just have to sit there and wait for stuff to come back.

So what do you do when you're checking your inventory reports from your supplier and you see that the best sellers are starting to dwindle in stock? It really depends on where you're at in your business and how much history you have. Now, the reason I say that is because if you've been at this for a while and you have a proven track record where you know what products you sell consistently, you can forecast future sales based on past performance. And you now have a bankroll, meaning a decent amount of money in the business accounts because you've been in business for a while. In that situation, my advice is, as soon as you start to see those inventory levels, drop, reach out to your suppliers and see if you can reserve inventory for yourself.

So let's just say you have a product where you typically sell, let's say five a week, five items a week from supplier, ABC. You see that they're now down to 50 units of inventory. That gives you about 10 weeks of runway if you're the only store that sells them, but maybe your competition is selling them also. So what you can do is contact your supplier and say, "Hey, I see we only have 50 items left of item number 1, 2, 3. We would like to reserve 30 of them or 40 of them, or maybe all 50." And you can ask them if you can place a deposit so that they can hold them for your company. Now, if they say, yes, you can negotiate what that deposit is. Maybe it's 10%, maybe it's 25%. Maybe it's 50%. Obviously the smaller, the better, but the type of deal you'll be able to arrange with the supplier is really going to be based on your history with them, your track record and your working relationship.

By the way, if you're listening to this or watching this, and you're a member of the Drop Ship Lifestyle coaching program, my advice is go to a lesson in module four, that's all about strengthening supplier relationships. That'll really help you here. I'm going to link to that in this podcast description. So you can go and check it out. So that's what you do if you have the experience, you have the bankroll. But what if you are newer, you're just getting started right now, maybe you've launched your store two weeks ago or even two months ago? And you know you're selling products consistently, but you still don't have much of a bankroll and you don't have enough history to be able to accurately forecast future sales. In that case, it's more risky to pre-purchase inventory. So my advice there would be don't do it. It's simply not worth it.

So what happens then for you if stock actually drops to zero and your supplier says, we're waiting on the next shipment to come in, but it's going to be, let's just say four weeks? Well, the first thing you should do, if this happens to you, is go into Google Ads. If you're using Google ads, like I recommend and like I teach over at Drop Ship Lifestyle, and make sure you're excluding all of the products that are back-ordered for the next four weeks. Because the worst thing that can happen is you continue to spend money promoting these things. You get people to go to your store. Let's just say you don't update inventory status and people are buying them. Then you have to let them know, hey, this product's back-ordered. Then they want to cancel their order. Then you refund them. Then you spent money for a sale that you lost.

Or you do what I recommend. You update the product page on your store to say this item is back-ordered until the state that's four weeks in the future and people don't buy it, your conversion rates drop because they know they have to wait four weeks. So if you have a situation like that, where products are back-ordered for, usually our threshold here is three weeks. But if we see three weeks or more, we cut our ad spend to it. And we update the product pages right above the add to cart button to say that the product is back-ordered, to say what it will be back in stock. And to let customers know if they're going to buy, they can expect to wait until whatever that date is.

Now, as let's just say this was the situation, a couple of weeks ago by, the products are now only two weeks back-ordered. Well, then you might want to turn your traffic back on. That's what I personally do, because people are more realistically willing to wait a couple of weeks rather than a month or two months, or hopefully this doesn't happen to you. This happened during the first wave of the Rona, where sometimes it was three months, four months. Now we're past that. I'm hoping it stays that way, but just so you know what to do in that situation.

Now let's say you have somebody go to your store and they do buy one of these products from you that's back-ordered, and they didn't realize that it was back-ordered. And then you tell them, you send them an email and they say, "I don't want to wait. I just want my money back." Well, what you could do then is try to recommend a similar product, something comparable that you sell, that they can get fast, something that's in stock.

Now this is something that ideally you're recommending to them before they buy. And what we'll do is let's just say again, we have the product that's back-ordered for four weeks. On the stores, we'll make that product, not have ads going to it, will update that product page to say when it will be back in stock. And then we'll also say you may be interested in product X, Y, Z, whatever the other products are that are comparable, that are in stock now. That way, when people are finding those product pages organically, that have back-ordered products, they can at least see something else that they can click through to buy now and get fast if they really need something fast. So that's my advice, guys. What you don't want to do is get into a situation, whether you're a brand new store or a store that's been around for a decade like mine. What you don't want to do is let sales come in for products that are back-ordered three weeks or more. And then let customers know after the fact.

That's when people start getting mad, that's when you could potentially lose money, that's when you can get bad reviews, you want to always be ahead of this. Again, if you have more experience in business, get ahead of this by pre-purchasing inventory. Still stays at the supplier's warehouse, they still ship direct to your customer, but you at least have inventory secure. If you're newer, just cut your ad spend, make sure you update your product pages in advance and make sure you're linking from those product pages to comparable products that are in stock and that can ship fast now. This is one of the reasons in my training program, The Drop Ship Blueprint, I advocate so heavily for finding at least 20 brands that you could sell for before you build your store. Because guess what? Like I talked about in the beginning of this episode, when it comes to drop shipping, we don't control our inventory. So ideally this happens less often than not but sometimes situations will happen where products are back-ordered, you'll have to adjust your ad spend and you'll need solutions.

So hopefully this episode provides you with some of them that can help you along your journey. Again, if you're a member of Drop Ship Lifestyle, I'm going to link it to the supplier relationship training in the description of this podcast. And if you're not a member yet, and you want to get a special offer on our training, by the way, it was the only training to ever be voted best eCommerce course by Shopify. What I'll do is post the link in this description that goes to dropshipwebinar.com. If you go there, you get a free in-depth training from me, plus a list of 237 profitable products that you can sell online, plus a special offer on The Drop Ship Blueprint. So again, that is dropshipwebinar.com. It'll be linked up in the description. Now as always, if you got value, I would appreciate it if you can give this a like if you're on YouTube, or leave a review if you're listening on Apple Podcasts. And with that being said, I will talk to you next Monday in the next episode of the eCommerce Lifestyle Podcast. See you everybody.

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