Consumers don’t care how you fulfill their orders, they just want it now.
In today’s Now Economy, consumers expect to find the products they want on your site at their fingertips, and then receive them how and when they want them. While consumer needs are simple, meeting their needs is incredibly complex. It’s complex because the traditional retail model is no longer enough.
It’s nearly impossible to accurately predict trends, stock the exact inventory that consumers will want, position it where they’re going to want it, build logistics to deliver how they’re going to want it, and still make money. However, it is possible to create more nimble supply chains to quickly react to demand. Leading retailers and brands do so by leveraging partner fulfillment models like drop ship and marketplace.
What’s the difference between drop ship and marketplace? Not too much!
Both drop ship and marketplace programs share the same key rules:
- The retailer generates consumer demand
- The retailer does not pre-purchase or store inventory
- The supplier (aka seller) ships products directly to the consumer when an order is placed
Drop ship and marketplace programs are more similar than different but are often implemented with nuances to support different goals. When looking at sales across inventory sources, the most important SKUs generate the bulk of the revenue and are managed closely by a retailer’s merchandising teams- this is traditional retail. The next tier of sales is often filled by drop ship. While less effort is used to manage these SKUs, your teams are still driving key levers such as pricing, promotions, product content on the product detail pages, and overall marketing. With drop ship, retailers often bear the shipping and customer support expenses. A marketplace helps with long-tail products, those that are considered to be important to have on your site as offers to customers but don’t drive enough sales to be worthwhile for your internal teams to directly manage. For this, you rely on trusted sellers to handle all of the operational elements and even carry the shipping expense.
Products should not be relegated to either drop ship or marketplace lanes.
The greatest benefit of a drop ship or marketplace program is that you can quickly test, learn, and optimize. When done right, your drop ship and marketplace programs are incubators for products you should bring in-house. The problem is most retailers and brands still think of drop ship and marketplace programs as independent concepts instead of two sides of the same coin.
Break down barriers to delighting your customers, and save months in the process.
Retailers who think of drop ship and marketplace differently create separate operational, financial, and technical structures to support each program. This separation also creates barriers to moving fast and adapting your business. The goal of having both these models is to maximize your margins, find winning products and meet your customer demand. The challenge is that to be successful you need to be agile, and with a siloed approach it could take you 3-6 months to move a successful product to a higher margin model.
This separation also bleeds into the customer experience and causes confusion throughout the entire shopping experience- from product discovery to returns and customer support. Supply partners are also caught up in the mess. If your supplier has a large catalog they may be working with you through three or four technologies. They end up wasting more time and money implementing, learning and operating technology instead of collaborating around co-marketing, product launches, and the overall customer experience.
No one can afford to take this messy and expensive approach anymore. Drop ship and marketplace are more powerful when they’re paired together in a unified solution. Connecting to drop ship, marketplace, or both puts you in the best position to create efficiencies, maximize revenue, and consistently delight customers.
Introducing CommerceHub Commerce Suite, a unified marketplace and drop ship solution, available as an upgrade to all current customers
With the introduction of Commerce Suite, we’re helping our customers unlock more value from their existing connection to our commerce network. Commerce Suite supports drop ship and marketplace in one solution and provides new Just-in-Time Merchandising capabilities for new product discovery and onboarding.
For existing CommerceHub customers leveraging our network for drop ship, we will add marketplace automatically for them to launch their own private marketplace. With this offering, we’re allowing our customers to easily move existing suppliers and product SKUs between drop shipping and marketplaces as they wish.
Now, our customers will be able to rely on CommerceHub’s growing network for more than just drop ship. They can host their own marketplace to improve the customer experience and scale faster with less investment.
Learn more about our unified solution—Commerce Suite— here.