It’s very tempting to think of drop shipping as a basic order fulfillment method just like any other. After all, at its core, it’s just a process whereby a consumer places an order with an online retailer but receives the order from the product’s actual manufacturer. As a retailer, however, drop shipping can be so much more than that. Thanks to its inherent flexibility and low-risk nature, drop shipping has the potential to be your ultimate tool for merchandising and product curation.
There are numerous ways in which your merchandising efforts can benefit from dropshipping; here are some of the most useful:
Increasing Volume with Existing Brands
If your store is selling out of certain products over and over, turning to a dropship model could be the answer. Your existing products could be selling out for a few reasons—maybe you don’t have the physical warehouse space to hold the proper level of inventory, or maybe you can’t manage to order the right amount from your suppliers, or perhaps you have limited open to buy. Whatever the reason, setting up a dropship arrangement with those products’ suppliers would be a simple fix to your problem. Where your inventory for that popular item was once limited to the amount you had on hand, supply can now always meet demand as a customer’s order is guaranteed to be fulfilled directly from the brand itself.
Pivoting to a dropship relationship with a few suppliers does not mean that you have to reinvent the wheel with respect to your order management processes. In fact, launching a dropship program largely takes the responsibility of shipping and fulfillment off your shoulders. Also, many furniture, home goods, apparel and accessories suppliers already dropship, so if you’re in any of those industries, it’s likely that your transition to dropship management will be quite seamless for both parties. If you’re still concerned about the basics of how to dropship, don’t worry. There are plenty of resources out there, as well as dropshipping software tools that can be of great use to you. [Download The Retailer’s Guide to Dropshipping]
Selling new products from new (and existing) brands
Another effective way in which drop shipping can be beneficial for merchandising is that your product mix and brand offerings can be drastically expanded and diversified with virtually no risk. In addition to doing more volume from the same SKUs, as we described in the above example, drop shipping can also allow you to sell new items from both existing and new suppliers without taking on the risk of additional inventory. In a wholesale model, there is tremendous financial risk associated with adding new product lines or experimenting with new SKUs. When you dropship, however, you can experiment to try to find the perfect product mix that maximizes revenue.
The importance of that flexibility to experiment should not be underestimated. In sports, it’s widely accepted that as hard and as often as you practice, there’s nothing like a real game to assess and ultimately improve your skills. That idea holds true in retail too. As a traditional wholesale retailer, you can have all the predictive analytics and the most talented, dedicated product curators in the world, but the only way to know for sure how well a new item will sell is to… well, sell it! When items are live on your site and being sold via dropship, you’ll be able to fully determine how to merchandise around them and maximize your ecommerce revenue.
Testing New Verticals
Drop shipping can mitigate risk to the point where retailers can test out merchandising with entirely new verticals, not just products and brands. You can find examples of this all over the ecommerce world: a dinnerware retailer who starts carrying a couple of new cookware/bakeware brands; a high-end clothing retailer who decides to sell a line of scented candles; a hip home goods store that experiments with some new jewelry designers.
The possibilities for expanding your product mix are virtually endless if you decide to dropship—and if you’re able to find the right dropship suppliers. Importantly, when launching a dropship program with new verticals or suppliers, you need to always consider how those new products fit with your company’s image and audience. If there’s a certain value proposition, quality level, or message that your customers have come to expect from you, don’t dilute that by indiscriminately adding new products to your site just because drop shipping allows you that flexibility. If you sell sustainable clothing at a high price point, for instance, a perfect fit (and effective new revenue stream) might be water bottles from S’well, a popular eco-friendly company whose mission is to “rid the world of plastic water bottles.”
As another example, if you’re a high-end kitchenware supplier, maybe you can start selling things like boutique cooking spices, coffees, teas, etc. Whatever your industry, if you successfully determine your company identity and find like-minded brands with whom to partner, you can easily expand and perfectly curate your product mix, with virtually no risk, through drop shipping.
Drop shipping is traditionally thought of as simply a method for fulfilling purchase orders from your ecommerce retail site. However, it can also be a powerful tool through which you can expand your inventory, test out new products, or sell goods in entirely new verticals. When considering new revenue streams, think about how you want to enhance your product mix, vendor mix, and/or category mix —chances are, drop shipping can help you accomplish your goals.
Josh Wexler is CEO and Founder of RevCascade