Drop shipping is a hands-free, wholesale fulfillment option available to online sellers of any size, working under a variety of business models. In short, the manufacturer fulfills orders on behalf of the retailer and ships them directly to the customer. Arrangements are usually made to make it appear that the order has come directly from the seller. Retailers are using it strategically to better serve their customers, streamline the order process and generate more revenue.
Retailers are not only trying dropshipping, they’ve already embraced it as part of their sales strategy and long-term plans to better serve their online customers. A recent study, Supply Chain Collaboration in Transformative Vertical Industries, found 73 percent of respondents have been utilizing drop shippers for over two years, and 51 percent have been doing so for over five years. It has proven itself to be a better way to do business overall, in a highly-competitive, digital eco-system. It can also play a critical role in a lucrative multi-channel strategy.
At the same time, manufacturers are finding Direct-to-Consumer (DTC) sales add another layer of profit to their bottom line. They can provide the service, yet continue to avoid the time-consuming and costly side of dealing directly with consumers. Basically, retailers and manufacturers have found a way to use the internet to split the labour and expense involved in the sales process while sharing the higher margins, resulting in more profit for both parties and a happier customer.
Manufacturers and retailers have worked together to develop and maintain better methods of electronic collaboration. They require a reliable way to share information without negatively impacting the customer journey, and ultimately improving it. This is often accomplished through third party eCommerce platforms, which sync inventory, streamline the order process, and provide delivery information.
What Motivates Retailers to Try eCommerce and Drop Shipping?
It may be more common for Canadian retailers to sell online, but it still isn’t a decision they take lightly. Several factors may motivate them to jump into eCommerce and adopt alternative methods of fulfillment.
- Consumer behaviour
- The opportunity to sell in a richer environment
- Increased margins
- Additional revenue
- Bigger market share
- Improving customer service and loyalty
The Benefits of Drop Shipping for Online Order Fulfillment
Many Canadian retailers are finally convinced that online sales are the way of the future. Along the way, they discovered that drop shipping makes eCommerce more feasible and profitable in a multitude of ways.
- Increased margins by reducing the total cost of order fulfillment, such as shipping supplies, warehousing and staff. Over 60% of retailers surveyed reported a reduction in costs.
- Dropshipping allows retailers to offer more expensive items with a low turnover rate, without having to tie up capital for inventory.
- Retailers can offer more choices, such as colours, sizes or styles, without bloating their inventory.
- There is far less risk involved in market testing new products.
- More than 80% of retailers surveyed (who have adopted dropshipping), report an increase in revenue and improved customer service.
- Almost 80% improved their market share.
What Challenges Prevent Retailers from Using Drop Shipping?
- Systems such as Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI), and Warehouse Management (WMS)
- Current process doesn’t support drop shipping
- Resistance to change
- Budget constraints
- Competing priorities
- Financial limitations
- Executives aren’t involved
- Physical assets
Integrating a system and building it into a multi-channel strategy may seem daunting, but there are solutions that make it easy and affordable. In my experience, Shopify does the best job at bringing it all together into a well-oiled machine. The platform offers a wide range of options and apps to sync your inventory for smooth online sales (including dropshipping) and offline sales.
“While not every retailer intends to adopt e-commerce and dropshipping, it is becoming increasingly difficult to find a retailer that has not at least considered how such technology could be incorporated into their business model to better support buyer needs,” the study concludes.
??? Have you tried dropshipping as part of your online order and fulfillment strategy? Please share your experience or questions in the comments below.
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