Once you have a virtual product assortment determined — remember, curation is the key — from some number of suppliers, inventory visibility is where drop shipping success will be made or broken. You can’t have many instances where you sell something to a consumer that doesn’t exist and can’t be fulfilled by your supply partners before you have big problems.
In a 2018 benchmark study IHL takes a deep dive into the relationship between ecommerce, omnichannel, and out of stocks in brick and mortar stores. Their main conclusion is that out of stocks are a huge issue that retailers have yet to address, costing the industry $984B per year worldwide. And this situation is only getting worse. As more retailers implement omnichannel strategies such as SFS and BOPIS, store inventories and resources are growing more and more strained.
Around the world, companies hold onto stock they know nothing about, or worse, promise products to customers they don’t have. Typically, retailers and brands operate on data that is only 65% accurate, wasting $1.5 trillion of revenue opportunities.
Even before Covid-19, in-store fulfillment was a big deal for retailers. In 2018, Target fulfilled 70% of online orders through its stores, while 30% of all of Neiman Marcus’ online orders are shipped from stores as well. With all the disruptions to the supply chain and customer behaviors that the Coronavirus has caused, it’s not […]
Many companies are struggling to keep up with higher consumer expectations around shipping. If a retailer or brand can’t deliver products within two days, customers will just hop over to another retailer or marketplace that can (ahem, Amazon). And the window is growing even tighter as next-day shipping becomes the norm. All of which means lots of companies are facing the stark choice of either squeezing margins further to improve delivery times or disappointing their customers.
Top-down approaches to trading partnerships can have costly effects on a retailer’s bottom line. Retailers overly focused on compliance will find their orders deprioritized in fulfillment queues and end up paying more for inventory as suppliers recoup chargebacks. They’ll also receive a steady stream of dummy inventory data sent by trading partners trying to satisfy SLA requirements. All this will lead to higher opportunity costs, late and canceled shipments, and a lower quality customer experience.
If you’re like a lot of our retail partners you hate being unable to fulfill an order due to limited cross-channel inventory visibility. You also find it frustrating that different channels can’t access the same assortments, leading to higher opportunity and shipping costs. And though you wish there was a way to offer faster shipping, your legacy solutions are unable to efficiently route orders to inventory locations closer to customers.
Many warehouses are cutting back or closing operations without advanced warning due to the Covid-19 outbreak. These sudden closures are leading to all sorts of challenges as retailers try to navigate the resulting assortment gaps, unfulfilled orders, lost sales, and opportunity costs. Customer-experience nightmares are occurring as orders for once in-stock items have to be canceled.
I Asked Over 200 Enterprise Brands What They Got Out of Drop Shipping–Their Answers Might Surprise You
For retailers, the benefits of drop shipping are obvious. It allows them to easily offer a wider assortment of products at retail prices while shifting much of the costs and risks associated with warehousing inventory back up the supply chain.