Will drop shipments become a major online fulfillment tool?
While ship from store is often touted as a primary way retailers can support e-commerce fulfillment, drop shipments from suppliers directly to customers are gaining more attention.
RSR Research’s new report, “Profitable Customer Engagement: The Unmet Promise,” exploring omni-channel order fulfillment strategies found a “new willingness” by many retailers to consider drop shipping directly from vendors.
“This has evolved over the past three years,” states RSR’s report, sponsored by Aptos. “Previously unwilling to entrust delivery (and customer address information) to their merchandise vendors and logistics providers, retailers have become far more pragmatic: within three years we expect to see parity among all retailers, with approximately 75 percent taking advantage of their suppliers’ systems.”
An RSR study from January sponsored by SPS Commerce likewise found that retail priorities had shifted more in favor of drop shipments due to “the need for speed, and perhaps even that renewed interest in the e-commerce channel.”
Beyond speed, the advantages for retailers of drop shipments include less upfront costs to purchase and warehouse inventories. A much wider offering of items can also be offered beyond those in stock.
“Retailers can offer a wider range of products online without ever needing to personally handle the inventory,” wrote Jett McCandless, CEO of Project44, which specializes in API (Application Programming Interface), on multichannelmerchant.com. “And they only purchase items directly from the distributer or manufacturer as their customers buy them.”
Not surprisingly, most of the challenges relate to not owning inventory. A lack of visibility into supplier inventory challenges the ability to provide customers with accurate ship dates, delivery timeframes and shipment tracking. Out-of-stock risks rise with less visibility, along with vendors addressing other retail partner needs. Retailers also risk hurting their reputation since they’re not in control of the delivery process.
RSR’s January report also found that retailers appear to be overestimating vendors’ capabilities to manage inventories. Wrote RSR, “Without visibility into inventory levels, this is nothing short of fantasy.”
- Profitable Customer Engagement: The Unmet Promise – RSR Research
- 75 Percent of Retailers Rank E-Commerce Sales as a Top Priority, Displacing Stores for First Time – SPS Commerce
- Retailers Found Unprepared to Meet “I Want It Now” Consumer Demand – HRC Advisory
- 5 Things You Need to Know to Ensure Drop Shipping Success – multichannelmerchant.com
- Drop Shipping – An Unachievable Ideal? – The Marketing Mogul
- How to Find Drop Ship Suppliers for your E-commerce Business – business.com
DISCUSSION QUESTIONS: Do you see drop shipments evolving into a core e-commerce fulfillment tool for retailers? What are the obvious and less obvious execution challenges?