If we know that inventory is the life blood of retail, what happens when we start to lose confidence that there’s enough inventory to meet consumer demand? While this is a scenario few retailers could ever imagine, as the uncertainty of recent times continues, more retailers are being forced to seriously think about how to prepare to avoid possible inventory shortages.
The need to accommodate more online orders is still at near holiday peak levels, this according to recent CommerceHub data. So, what can retailers do to safeguard inventory levels? Put simply—expand assortment and your network of suppliers via drop ship.
Agility and a supply chain that is demand-driven and responsive is key. This can only be achieved with capabilities that enable you to quickly add to product categories or shift to new product categories without incurring the capital expense of housing owned inventory. It also requires access to a large network of suppliers, distributors to deliver what customers need.
Drop shipping allows you to:
- Expand product assortment quickly
- Rely on a wider network of suppliers to meet inventory needs
- Maintain low overheads
- Provide a great customer experience
Retailers who are actively utilizing their ecommerce platforms and taking advantage of drop-ship capabilities to be more agile in this time of uncertainty are seeing the benefits.
One of the most valuable things about drop shipping and having a digital supply chain is being able to rely on thousands of suppliers to continue to keep the supply chain going.
With drop shipping, retailers are able to supplement inventory that’s in their warehouses and get it distributed across third-party logistics companies or their drop-ship suppliers to continue to sell and diversify and mitigate inventory distribution and fulfillment risk, which is important right now. Sourcing products through multiple channels—using stores, your own fulfillment/distribution centers and drop-ship suppliers to fulfill demand gives you added flexibility, which helps to minimize the risk of out of stock.
Drop shipping allows you to be both reactive and proactive in response to demand and anomalies that might impact your business. It also helps to minimize the risks and cost associated with purchasing and moving stock unnecessarily, particularly during periods of uncertainty and heightened demand. Drop ship enables you to source directly from suppliers when products go out of stock. For example, if several suppliers fulfill similar items, this solution offers a backup plan if one supplier runs low on inventory, keeping the customer experience intact.
A retailer can work with their suppliers to plan for inventory needs. This is especially important for top-performing products (Hero SKUs). The ability to work with a third-party logistics (3PL) partner like Ingram Micro and house top selling products using their vast network of distribution centers is an important benefit you can gain from virtual fulfillment via drop ship. The peaks in demand can be hard to manage so having more weeks of supply (WOS) inventory on top performers will help mitigate possible inventory shortfalls.
Another important benefit that drop ship enables is the ability to manage volume – the pandemic has led to peak like volumes for many retailers and this in turn has caused delays in delivery. The diversification of inventory allows for retailers to bypass a fulfillment location that is overwhelmed and ship a product from another location that has capacity.
“It takes a moment like we’re seeing now to bring drop ship back into the spotlight. This is an important lever that retailers can pull to keep pace with changing consumer demands and adjust to a new economy that emphasizes all things digital.” – Frank Poore, CommerceHub Founder & CEO
Having a reliable partner to provide dependable ecommerce capabilities is essential for retailers as their need to adapt accelerates. It goes without saying that retailers can’t afford to lose control over their brand presence, experience and influence. The current retail landscape is increasingly changed during these challenging times and those who are able to rise to the occasion are going to see the benefits.
To learn more about the benefits of a well-executed drop-ship program, download our Total Economic Impact™ study, which determined that retailers can see ROI of 461% in a payback period of less than three months. Find it here.
CommerceHub – A Proven, Reliable Drop-Ship Partner
Over 98% of the 12,000+ brands and suppliers on CommerceHub’s network remained operational, processing and fulfilling online orders between April and May 2020.
CommerceHub platform and capabilities:
- One partner, one solution
- Direct to consumer program that matches performance of owned inventory
- Streamlines drop-ship program activity across all channels
- Onboarding; best in industry account management and 24/7 customer support
- Track, report and optimize supplier/distribution network performance