Incorrect, canceled, or late order fulfillments can quickly tarnish a retailer’s brand. A 1% to 2% increase in cancellation rates might mean hundreds of thousands of upset customers, while late shipments can quickly ruin the goodwill engendered by free shipping. Consumers are also generally quick to tell their friends and family about bad ecommerce experiences, so the damage caused is much greater than its effect on individual customers.
Drop shipping is not just another distribution method but an entirely different way of doing business that involves the integration of suppliers and retailers into many of the supply chain roles that are typically kept separate in wholesale. Despite its many advantages, therefore, drop shipping also has a lot of unique and complex challenges that must be navigated correctly in order to function at peak efficiency.
Finding the right retail partners to drop ship with will lay a solid foundation for the growth of your operation. Some of the ROIs you might reap include lower cancellation and return rates, lower oversell risk, lower data exchange overhead, higher volume with reasonable predictability, more inventory turns, quicker times to shipment, less tax liability, the ability to bring products to market faster, lower production and logistics costs, and hopefully, increased sales and marketshare.
If you’re just starting out with drop shipping, it’s a good idea to begin by offering products from your catalogue that are more ecommerce friendly.
The logistics required to ship items similar to books is much less complex than bananas and can give you the necessary experience to later tackle difficult categories.
Every manufacturing, warehousing, and logistics decision should be made with the goal of strengthening your other wholesale and direct-to-consumer sales channels, and vice versa.
Check Out Our Guest Post on Shippo’s blog: Five Most Important Metrics for Monitoring Supply Partner Performance
Read the full post here.
Instead of a threat, drop shipping should be seen as a vital opportunity for brands to make the necessary pick, pack, and ship investments to take advantage of this growth.
Besides weighing the various benefits and drawbacks, you must be comfortable with the fact that marketplaces are not just neutral platforms for selling products but competitors in their own right who will have access to your sensitive customer and supply chain data.
In the coming year we’ll be adding some cool data features to the Dsco platform that will allow trading partners to not only access such data but perform just these types of correlations with their own data in real time to tackle issues such as excessive upgrades, late shipments, and cancellations.
The problem with safety stock buffers, however, is that they represent unsold inventory. A 10 item buffer across all of a supplier’s inventory means absorbing a lot of opportunity costs to prevent cancellations