Last week in “eCommerce Logistics: Suppliers and Retailers - Part 3,” we touched on how drop shipping alters the conventional relationships between suppliers and retailers. This week in “Part 4,” we’ll address three distinctive strategies for drop shipping success.
The position as a retailer has many benefits for consumers. Although, retailers must work to justify their positioning as middlemen. You might ask yourself, where is the value in this? What can I add to the equation? Often, the mental narrative of becoming a retailer goes something along the lines of: “I don’t want to develop my own products, so I’ll sell others. But, where do I start selling? Online sounds like a great option, to avoid complex, expensive, and outdated physical storefronts. What products should I consider reselling? In order to resell I have to buy them first. How am I going to finance this? Where would I store the products? Drop shipping is probably my best option. Virtual products from suppliers. Simple. Let’s go!”
The issue with this narrative is that it unfairly positions the focus that the first strategic step is finding the right drop shipping suppliers and their products. Virtually all successful retailers, not just online, provide value by creating a unique selling proposition. Drop shipping somehow focuses everyone on products, rather than sales.
In an Amazon-dominated eCommerce world, it’s important to understand the classic P’s of marketing: product, price, promotion, and place. If you are drop shipping products that multiple retailers have access to, and you’re advertising those products in a space where everything from the presentation of the product to the product data and descriptions are standardized, the only P you are left with is price -- and we can all foreshadow how that will end.
With this model, all your products will look like everyday commodities. Distributing too much stock in a supply side focus -- based on drop shipping -- seems to hold many retailers back from identifying the more important need: in a virtual hyper-connected and hyper-competitive world, you need to identify your unique selling proposition.
Consumers respond to selective curation. There's value in telling the consumer what to buy. Just because the product is available, doesn’t mean it justifies it to be part of your selection. Drop shipping eliminates the conventional friction that drives curation out of necessity -- limited dollars for inventory. However, that friction isn’t a negative thing. Successful retailers don’t simply take a data feed of thousands of products from their suppliers and mark it unchecked to their eCommerce storefront. In addition, they generally work with more niche suppliers, such as branded manufacturers.
Wholesale distributors don’t carry niche products. If you’re hoping to find multiple distributors with hundreds of thousands of products to push to Amazon, you’re wasting your time. Generally, a category dominated by distributors is one you’ll really have to work hard for to truly have a unique product assortment. Mindfully choose your supplier partners, then curate and limit their products as you put together your product selection.
We’re discovering more and more successful retailers using drop shipping as a means to test new products and vendors. How great is it to have an online storefront where you can add a virtually-sourced product to your assortment? And, if the product doesn’t sell, you don't lose any money from the inventory buy!
However, if you knew you could sell a product multiple times, the economics could be better to actually make those inventory purchases. This strategy works particularly well for two reasons. First, work with the existing vendors you purchase wholesale inventory from, diving deeper into their product selection with drop shipping.
Second, for new vendors, if you move away from being a drop ship vendor and towards a stocking vendor, many of your trading relationships will invest time and resources they might not have initially wanted to spend. Physical inventory and the more conventional wholesale process is good too, and it can be used as a strategic advantage towards your relationships with suppliers.
It is extremely important to consider the overall consumer experience. It begins with the virtual product presented on your eCommerce storefront. Many successful retailers approach the product data piece by being hands on and using data supplied by the vendor as a starting point. They often blend it with the curation process to describe products and images. This not only ensures rich data, but also helps with SEO.
Retailers also consider inventory availability. If a manufacturer continually creates products, or has a deep inventory stock, there is less risk that you will end up selling something that cannot be fulfilled. It’s also important to grasp a consumer’s need for transparency into the ordering and fulfillment process of drop shipping.
A drop shipping retailer is not going to simply pack and ship a product. Consumers need to know that you have a partner involved in the fulfillment process. This used to be recognized as a negative feature. However, today, with so much drop shipping and with the existence of major marketplaces, consumers are used to transparency. They understand that the company they are buying from isn’t necessarily the company that is fulfilling their product. [1]
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Sources: [1] - PracticalEcommerce
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