Drop ship: a new strategic weapon for retailers and brands

This article is brought to you by Retail Technology Review: Drop ship: a new strategic weapon for retailers and brands.

By Philip Hall, Managing Director Europe at CommerceHub.

Retailers can utilise drop shipping (the shipment of goods from a manufacturer or wholesaler, directly to a customer on behalf of the retailer) as a strategic weapon against short-term shock waves such as COVID-19 and as a means of more permanently extending their digital business.

No one could have foreseen the disruption that organisations across the world were suddenly faced with; the retailers without an online presence were, seemingly overnight, left with no way of selling products to their customers for months on end. For the retailers that do have an omnichannel presence, the drop-ship model enables them to be extremely agile and digitally extend their business by quickly adding products so that consumers can safely and easily purchase from the comfort of their own home. 

The COVID-19 pandemic has been the catalyst for an elevated baseline for ecommerce and the need to intensify their digital offer. This crisis has also shown retailers the importance of diversification. Diversifying the supply chain and adapting it to be more demand-driven and responsive enables retailers to lower the risk of disruption; removing the possibility of a negative impact on sales and customer experiences while still reducing the time it takes for consumers to receive orders.

Here are some of the key advantages of a successful drop ship programme executed with the help of an expert partner:

A question of build vs buy             

Retailers face the question of build vs buy for their drop ship programmes: which option will provide the greatest ROI? Whilst it’s often perceived that outsourcing programme development and expertise will be more costly, with drop-ship programmes, that isn’t the case. In fact, some retailers have seen an ROI of over 400% after they shifted the management of their drop-ship strategy to a trusted, external partner. Not only can expert partners support with streamlining processes, including supplier onboarding, and creating a truly flexible and adaptable system, but they can also assist in identifying new suppliers and strengthening the digital supply chain to enable customer demand to be met.

3 key advantages of adopting and outsourcing drop ship as a strategic weapon

Streamlined onboarding of suppliers

Onboarding suppliers to a drop-ship programme can be a lengthy process when retailers are faced with executing the task themselves. Integrating suppliers’ file exchange information, reviewing the physical packaging of items and creating and loading supplier catalogues can take upwards of three to six months at a time.

Working with an expert partner will enable supplier onboarding to be streamlined. They can qualify, implement and manage support for suppliers connecting to your programme. Additionally, having a system in place that is flexible and adaptable will mean that suppliers can continue to be added quickly and efficiently.  

We have shown a 60% reduction in the speed of onboarding suppliers from using a dedicated outsourced team and platform. This approach has resulted in retailers and brands being able to thousands of products faster and accelerate revenue growth.

Effectively manage supplier performance

Ensuring suppliers meet service level agreements while also making sure they consistently update out of stock items, estimated delivery times and successfully make deliveries, can be an administrative challenge when handled in-house by a retailer.  

A drop-ship programme deployed with the help of an external expert gives greater visibility over supplier performance. By connecting with suppliers through an integrated system, retailers can receive reliable and up-to-date information about product listings and delivery times and ensure suppliers are kept to task.

Keep the customer experience intact 

Retailers often worry about poor performance from integrated suppliers will result in negative customer reviews and decreased customer retention. This does not have to be the case. In fact, drop-ship programmes, when executed correctly, can improve the customer experience.

A platform that can is agile enough to align perfectly with the desired customer journey and which is fully integrated with the internal fulfillment capabilities of a retailer, means the financial advantages of dropship can be fully realised. Better product selection through an extended range and better order fulfilment rates results in fewer reports of negative customer experiences. Positive experiences often increase trust, and retailers will then be more likely to see uptakes in customer retention and average order value.

Retailers can trust brands and distributors to deliver a great customer experience, as they have been investing heavily in their own direct-to-consumer capabilities and now, in some cases, are arguably better than retailers in meeting customer expectations.

Conclusion

Drop shipping should play a key role in any retailer’s ecommerce strategy. It’s a proven way to safeguard your business and meet the evolving and future demands of consumers. The time to future-proof your business is now.