As the busy holiday season gets closer, the race is on among big box retailers and major e-tailers to offer faster, cheaper delivery options. Industry onlookers caution about the impact shipping costs can have on a company's bottom line, and yet it's clear that these "shipping wars" between the likes of Amazon, Walmart, and Target could make it difficult for other retailers to compete and attract some of their most valued customers.
While the fulfillment costs involved in some of these shipping strategies are a barrier for many retailers looking to offer similar incentives, one strategy is proving to be an attractive alternative: drop ship.
Drop shipping is a fulfillment model that allows retailers to source products from an alternative store or warehouse, or buy products from a wholesaler and ship them to the store or directly to the customer. This strategy opens up a whole new realm of possibilities for retailers — and for consumers.
Of these new possibilites, here are the top 4:
1. Give Your Customers What They Want
In a nutshell, drop ship allows customers to buy whatever they want to buy, when they want to buy it. This means retailers can avoid inventory challenges typical of the holiday season such as overstocking as well as out-of-stocks. You have the ability to satisfy what your customer came into your store looking for every. single. time. The goal: convert more holiday sales by never having to say “no” to a customer.
2. Turn Up the Product Offerings, Turn Down the Risk
The biggest opportunity drop ship provides holiday retailers is the ability to offer a vast breadth of virtual SKUs while keeping physical product SKUs to a minimum. Essentially, a retailer can display products that are popular and proven to sell in-store (standard sizes, maybe in a few popular colors) while using an endless aisle solution to give customers the option of ordering an item that is not regularly stocked or perhaps just out-of-stock at that moment. This tactic can drastically reduce the cost of carrying large amounts of inventory, temper the ever-increasing cost of retail space, as well as give retailers the opportunity to "save the sale."
Retailers, in essence, can use endless aisle with drop ship as a “one-two punch” to lessen the risk of stocking an over-broad selection at the store level, much of which can either go unsold or become stale, and in doing so, increase their opportunities to sell when a customer is looking for a unique or perhaps more expensive (and therefore, higher-margin) item.
3. Minimimize Theft
Another noteworthy advantage of drop ship is the reduction in security fraud — both employee- and customer-related, at a time when stores will be bustling with holiday shoppers. Reducing the risk of shrinkage from product stocked on store shelves is a huge bonus.
4. Combat Showroomers
Finally, the ability to sell to showrooming customers could make drop ship a game changer. Retailers, acting as omnichannel fulfillment centers, can confidently encourage showroomers to browse their extended offerings via their own mobile devices or in-store kiosks. Consumers can complete the purchase right then and there, reducing the risk of them going online later and purchasing from a competitior. Especially for retailers with limited physical space, drop ship has the potential to become a new norm as consumers come to expect these fulfillment options.
How can drop ship fit in to your fulfillment plans? Get a free copy of our whitepaper, 4 Components of an Optimized Fulfillment Strategy: Steps to Delivering on the Omnichannel Promise.