REI ventures into drop shipping
REI has become the latest retailer to roll out vendor direct shipments to help expand its online offerings.
Initially, a few footwear brands will be involved. Apparel and additional categories will be added over the next year. REI said customers should not notice any difference shopping REI.com. Orders fulfilled directly from vendors can only be shipped to home addresses.
“This functionality opens up so many doors for our customers and gives them access to new sizes and styles of products that we could not stock previously,” said Curtis Kopf, REI’s chief digital officer, in a statement. “Now it will be easier to support our customers when they are asking for extended sizes, new styles, or additional colors.”
At Macy’s, vendor direct and mobile have been “two of the big accelerants” behind the retailer’s recent double-digit online growth streak, Jeff Gennette, CEO, said on the retailer’s second-quarter conference call. Vendor direct shipments accounted for 10 percent of Macy’s online orders in 2018, and the retailer was halfway towards adding one million SKUs to the program in 2019.
“Vendor direct only has upside,” said Mr. Gennette. “It adds sales and gross margin, and increases both customer satisfaction and traffic to the site. The zero capital and inventory investment make for a very high ROIC rate.”
The proportion of online goods being shipped directly by vendors isn’t readily known because retailers generally don’t discuss the fulfillment method, also called drop shipping.
A study from Lehigh University from December 2017 stated that 25 to 30 percent of all e-commerce transactions are drop shipped.
For retailers, the pros of drop shipping are reduced inventory risk and being able to offer an enhanced “endless aisle” of products online. The cons include providing information on best customers to vendors as well as loss of control of the delivery process.
A recent survey of retailers as part of a study from DiCentral, a provider of supply chain integration services, found 87 percent experienced increased revenue and 84 percent improved customer service after adopting drop shipping.
- REI brings customers broader product selection, more sizes and color options online – REI
- Macy’s, Inc.’s Q2 2019 Earnings Call Transcript – Seeking Alpha
- Drop Shipping: A New Opportunity for Retailers and Suppliers – Lehigh University
- A New Study on Dropship and Omnichannel Trends – DiCentral
- Survey: Dropshipping Drives the Future of Omnichannel – My Total Retail
- Will drop shipments become a major online fulfillment tool? – RetailWire
- Where are the pain points for suppliers engaged in drop shipping?–- RetailWire
DISCUSSION QUESTIONS: Does drop shipping make more sense for retailers such as REI and Macy’s and less for others? Do you overall see more benefits for retailers than drawbacks from vendor direct fulfillment?