How Drop-Shipping is Transforming the Retail Revenue Model
In 2019, the only thing that’s certain for retailers anymore is this: the traditional business model isn’t working anymore.
With 51 percent of Americans now preferring to do their shopping online rather than in person, retailers need to drastically change their business models to keep their customers coming back to their brick-and-mortar stores — or at the very least, their websites.
But while last year set records for store closings, there's one new way that retailers can stop the bleeding: drop-shipping, the cost-effective solution that retailers around the world are racing to adopt. So, what is this tactic which is taking the e-commerce industry by storm?
Staying Relevant in the New World of E-Commerce
One of the main problems facing traditional retailers today comes from their inventory limitations; they’re constricted to the confines of inventory kept in their stores and warehouses, and they simply can’t afford to buy and hold inventory for an extensive SKU (stock keeping unit) count similar to that of retail giants like Amazon.com or Walmart.
Many traditional and small retailers are so caught up in trying to differentiate themselves from these sites that they may be missing the key to their own success — using the back-end solutions that Amazon and Walmart rely on to the smaller retailer’s advantage. These retailers can curate an extended aisle of products that resonate with their customers’ styles and doesn’t require investment in inventory.
But how can traditional retailers offer more product that’s catered to their audience without incurring expensive costs? The answer lies in drop-shipping.
How Drop-Shipping is Changing the Game
Drop-shipping is the practice of retailers working with vendors directly to select products they think will resonate with their customer, selling those products from the retailer’s own website, and then sending the order back to the vendor to fulfill. This process allows the retailer to sell as many new products as it wants without having to carry any of the inventory nor the heavy costs.
This fulfillment method not only allows retailers to purchase and sell more merchandise than they could before, but they also gain new opportunities to handpick product that’s perfectly tailored to their customers. Drop-shipping even lets them test out new inventory choices with their audience to see what works and what doesn’t, and without the burden of wasting money by ordering too much or too little inventory.
By using drop-shipping to create a better online store, retailers can create stronger brand loyalty and stay true to their curated point of view — without losing their customers to big online competitors.
How Retailers Can Adopt Drop-Shipping
Adopting this new revenue channel can take up a lot of resources for any retailer. Connecting with new vendors, identifying untapped products to test, and developing new partnerships are all crucial aspects of a successful drop-shipping program, and not every retailer has the time or money to do it all themselves.
Luckily, there are new supply chain optimization solutions and revenue-generation platforms out there that are making it easier than ever to not only implement a low-cost drop-shipping program, but also continue scaling the program. By helping the retailer connect to vendors as well as manage vendors’ product data, inventory and transactions all in one place, these solutions give retailers of any size the tools needed to adopt drop-shipping and significantly increase their revenues.
Online retail giants have shifted the consumer’s mind-set to expect getting everything they want from a single website, and then having those items delivered within a few days. Drop-shipping allows traditional retailers to meet consumers’ new expectations, while at the same time increasing basket size, revenue and customer loyalty.
Related story: 6 Ways Amazon Has Changed Buying Behaviors