Time to re-think drop ship: Four common misconceptions

In by Betsy Whitney

Many retailers appear to have unfounded fears about drop ship; the idea of suppliers fulfilling direct-to-consumer remains a concept that is yet to gain momentum amongst European retailers. However, in an environment where fast and cheap delivery is considered a necessity, and warehouse prices are soaring, the reality is that many retailers aren’t delivering on customer expectations (quite literally!). Things need to change.

Drop ship offers retailers the opportunity to expand both product range and customer base. However, these benefits continue to be overshadowed by misconceptions surrounding resource investment, as well as suppliers’ capabilities to fulfil supply and demand. The truth? These myths are outdated.

In this blog post, we de-mystify the top four myths and misconceptions we often encounter around drop ship and explain how it could be the key to reinvigorating retail growth strategies.

  1. Retailers can lose control to suppliers

The customer experience remains aretailer’s top priority – and rightly so. Letting go of this control to suppliers is the first mental obstacle retailers face when considering drop ship. But retailers don’t need to lose control to their suppliers.  From order lead time to visibility and stock availability,
drop ship can emulate the retailer’s own model; suppliers have even been able to offer direct-to-consumer service levels that rival those of retailers.

  1. Drop ship endangers customer experience

Of course, when it comes to every logistics operation, the inability to respond to changing customer demands is a fast-track to business failure that no retailer can afford.

When demand spikes in peak times or an order goes missing, many retailers believe that drop ship cannot be controlled, but this perception is based on failed legacy technology constraints and is no longer true. Through cloud-based drop-ship hubs, both suppliers and retailers receive a single source of information. Retailers can track supplier performance in real-time, and access to an intuitive, cloud-based drop-ship solution provides an efficient route to new markets.

  1. Drop ship is resource intensive

No retailer wants to hire more employees just to manage their drop-ship operations, and there is no need to because it is managed by exception. For example, a retailer can set an automated alert if an order hasn’t been shipped within 24 hours, even if the contract demands 48-hour shipment. At this point, a retailer can opt to intervene or trust the supplier to meet the target. With complete visibility into every supplier’s inventory, as well as the order processing status, this immediate and accurate information forms a far more proactive retail model.

  1. The ROI doesn’t exist

More and more retailers are finding themselves overhauling their existing fulfilment models. And whether this means buying warehouse space or investing in automation, some retailers may be surprised to discover that drop ship holds the key to achieving rapid ROI.

But how? With the spiraling cost of warehouse space, particularly in the UK, any reduction in held inventory can offer an immediate return. Drop ship allows retailers to quickly test new products and categories without the pricey warehousing and stock investment.

In conclusion

Retailers who want to expand without the cost of additional inventory and warehouse space need to consider another model like drop ship. Suppliers are both willing and able to replicate, and even exceed, the level of customer service offered by retailers; and immediate access to stock and order information enables an exception-based management model that not only enforces standards but also minimizes resources and operational costs.

What do you think? Get in touch with CommerceHub to find out how we can help your retail business expand inventory via drop ship.