The way we shop online is changing, and retailers must respond to remain competitive.
Inspired by the emergence of social channels like Instagram, Pinterest and Houzz, today’s consumers have little patience for browsing retailers’ category trees for products they care about. Instead, consumers want to quickly and easily search retailers’ sites for specific items.
Consumers have even less patience for long delivery wait times. In the current retail environment, most shoppers expect products they order online to arrive at their doorstep in no more than 2-3 days.
For example, if a customer is inspired by Pinterest to shop for purple dresses of a certain style, but then is unable to find dresses in the color or style she wants at her favorite clothing retailers, she’ll move on to competitors. And even if a retailer does offer her the products she wants, she will likely lose interest if that retailer cannot guarantee fast shipping.
The success of Amazon illustrates these changing customer preferences. It is no coincidence that the retail giant has grown exponentially in recent years. The site is home to approximately 400 million products, and roughly 46 million of those are available with free two-day shipping to Amazon Prime members.
Retailers must evolve or risk losing sales to Amazon and other competitors that can deliver on customer expectations. Many retailers are achieving success by prioritizing product assortment expansion. Wider product selections satisfy changing customer needs, and help retailers retain customers and remain relevant in the age of Amazon.
Retailers that have focused on product assortment growth are seeing results. An analysis of CommerceHub data suggests that approximately 70 percent of the average retailer’s GMV growth can be attributed to product assortment expansion.
But despite the obvious benefits of product assortment expansion, most retailers simply cannot afford the sizeable upfront inventory and fulfillment investments required to grow product offerings and compete with Amazon’s network of fulfilment centers all across the globe.
So how do retailers stay in the game? That’s where drop shipping comes into play.
What is drop shipping?
Drop shipping allows retailers to sell a brand or manufacturer’s products without investing in the physical inventory and warehouse space up front. Instead, the brand, manufacturer or distributor holds the inventory and ships products directly to the customer.
This approach is a win-win for both retailers and brands. Brands get their products in front of more customers by listing on major retail sites, and retailers enjoy the benefits of wider product selections without spending millions to purchase and store inventory and fulfill orders.
Suppose a retailer carries only black and white versions of a blender in-store. Through drop shipping, the retailer could offer green, red and purple blenders online, in both small and large sizes. The expanded assortment of blenders makes it possible for the retailer to satisfy customer desires without significant additional investment in inventory and fulfillment resources, or even the capability to predict and forecast those needs.
How can retailers know which products to drop ship?
While drop shipping allows retailers to add virtually any product to their assortments, smart retailers focus on products that make sense for their retail brands. Drop-shipped products appear alongside owned inventory on the retailer’s site and naturally align with other products in the catalog. For example, consumers don’t expect a home goods retailer to sell clothing, but clothing organizers or hangers might be a good fit.
Smart retailers also look to competitors to determine which SKUs to add to their assortments. Manually sifting through catalogs is time consuming, and the overhead merchandising staff costs are expensive. But by working with automated tools and current supplier partners, retailers can efficiently analyze competitors’ products to narrow down which SKUs to add.
How can I enable drop shipping?
It’s impossible for retailers to expand product assortment through drop shipping without a way to connect merchandisers to available brands and suppliers. The right technology allows retailers to quickly and easily search through catalogs to discover new SKUs to add to their ecommerce sites.
The right tools also ensure that retailers meet customer expectations for fast shipping. Retailers can connect to available suppliers and fulfillment providers that offer the fastest route to the customer, while still maintaining control and visibility over the entire delivery process.
Enter CommerceHub. Our retail customers can connect with a network of integrated drop shippers, onboard new suppliers quickly and proactively identify fulfillment problems before they impact the consumer. Retailers using CommerceHub can not only ensure they offer the products their customers want, but can also guarantee fast and reliable delivery.
Learn more about how CommerceHub can enable drop shipping for retailers today.