How to Drop Ship Successfully Part 6: How to Manage Inventory Visibility

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.

How to Drop Ship Successfully Part 1: The Key Solution For Out of Stock Inventory

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.

Accelerate drop ship ecosystem growth

Expanding your drop ship ecosystem can take a lot of time. Getting trading partners to agree to drop ship, onboarding them, and finally going live can take anywhere from several months to over a year per partner. This raises opportunity costs, hampers your ability to quickly expand assortment, and increases inventory risk when you’re forced to rely on wholesale buys to access the products you need.

D3 New York Takeaway: Retail Is Going All in With In-Store Fulfillment

From all of the presentations and panels that I attended, it’s clear that retailers are going all in with using their store fleets to fulfill online orders.

This is a really interesting strategic move considering that, as noted above, stores have the lowest accuracy of any inventory asset in retail. It therefore highlights the difficult choice that retailers face.

If order volume grows at 20% per year, a retailer will have to invest in doubling its fulfillment capacity every five years. This is what we’re seeing with Amazon but it’s not something anyone in the supply chain would look forward to doing. Building new FCs is expensive, time consuming, and risky.

Four Advantages of Brick and Mortar Retail

When brick and mortar stores harness the above advantages they do well even in the current difficult retail climate. That’s why companies like Best Buy, Walmart, and Target have been able to not just hold their own but thrive in spite of ecommerce eating up more of the retail landscape. Such stores provide a slew of conveniences and advantages that ecommerce can only dream of.

Unit-level tracking isn’t a luxury. It’s a necessity.

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. 

Retail Is Going All in With In-Store Fulfillment

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 […]

Faster Shipping = Better Customer Experience

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.

Great Trading Partnerships = Great Drop Shipping

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.

A Solution for Distributed Order Management

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.