Survey: Dropshipping Drives the Future of Omnichannel
As the competition between retail behemoths Amazon.com and Walmart heats up, other retailers are paying close attention to the factors driving demand for home delivery. At DiCentral, we have front-row seats to the evolving online retail landscape and recently partnered with the Center for Supply Chain Research at Lehigh University to investigate the motivations and expectations of today’s consumer and the implications on modern supply chains.
Over 180 retail and manufacturing C-level executives, vice presidents and senior managers were surveyed on the motivations, challenges, benefits and supply chain implications of online shopping and home delivery. The resulting whitepaper, Supply Chain Collaboration in Transformative Vertical Industries: Implications of Omnichannel and Dropshipping, reveals the impact of evolving consumer behaviors on global supply chains.
The most impactful conclusions drawn from the survey results were concentrated on the topics of dropshipping and systems integration. Dropshipping is an order fulfillment method in which retailers can delegate inventory handling directly to manufacturers, enabling them to free up shelf space and eliminate costly holding expenses. Conversely, manufacturers that fulfill dropshipping orders on behalf of retailer partners average 18 percent more profit than traditional manufacturers.
Dropshipping also was recognized by 88 percent of retail respondents as being inevitable for their long-term success. Benefits of dropshipping that are integral to long-term success include increased revenue and improved customer service. Among retailers surveyed, 87 percent experienced increased revenue through dropshipping. Improved customer service after the adoption of dropshipping was reported by 84 percent of retail respondents.
Manufacturers face additional challenges as a result of consumer buying behaviors and demand for dropship delivery options. Manufacturers have relationships with many different retailers, and each have their own unique set of business rules for the ordering and fulfillment process. As a result, manufacturers recognized system integration obstacles as their second most pressing challenge, behind the most widely reported challenge of competing priorities.
Despite the pressures of systems integration and competing priorities, manufacturing respondents also noted benefits of dropshipping. At least 66 percent of manufacturers surveyed experienced increased revenue, and 53 percent experienced margin expansion with e-commerce and dropship.
In taking a closer look at systems integration, survey responses indicate that the greater the degree of collaboration between retailers and manufacturers, the greater the results. As many as 71 percent of manufacturers noted a significantly improved retailer relationship after integrating systems, with 56 percent experiencing a feeling of commitment for the future after binding systems for dropshipping. Retailers also experienced a feeling of partnership, reported by 56 percent of retail respondents who have bonded systems with manufacturing partners. Over half of retailers surveyed also experienced improved loyalty with manufacturers after dropship integration.
The study offers a valuable glimpse into the road ahead for retailers and manufacturing partners. As online shoppers increasingly expect flexibility and immediacy when it comes to fulfillment and delivery options, retailers and manufacturers of all sizes look to maximize their omnichannel potential by leveraging dropshipping and systems integration.
The research clearly demonstrates that successful e-commerce and dropship programs are highly correlated to the level of collaboration developed between retailers and manufacturers. Supply chain decision makers should consider these industry benchmarks when developing the proper framework for thriving in an omnichannel world. There’s no better time than now for retailers and manufacturers to get in the dropship driver seat and take control of their supply chain profitability.
Steve Scala is vice president of corporate development at DiCentral, an EDI software services company.
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Steve Scala is vice president of Corporate Development at DiCentral, an EDI software services company.