Forrester predicts online retail sales will double over the next five years, with a majority of growth coming from online and digitally influenced offline sales, and growth in eCommerce comes growth in drop shipping. Many retailers are implementing an ‘endless aisle’ through drop shipping to expand their product offering without needing to warehouse them physically.
With a rise in popularity, we’ve compiled five best practices to ensure a successful drop shipping program.
Analytics are Everything
To best manage a drop ship program, you need full visibility to all order information and vendor performance. Monitoring vendors is business-critical, as it provides insights into who is adhering to your service level agreements (SLAs). It’s also important to keep drop shipping analytics and metrics top of mind, tracking growth, exceptions, Gross Merchandise Volume (GMV), and Year-Over-Year (YoY) comparisons.
Order history/demand planning can help you expand into new vendor relationships to enhance your product strategy.
Treat Your Vendors Well
With expanding product assortment being one of the key benefits of drop shipping, you want to work with the best vendors possible to ensure you have quality product offerings. A key component to developing vendor and maintaining vendor relationships is to make your company attractive to do business with. Offering flexible integration options like EDI, API, JSON, and web portals ensures that your vendors can connect to you in a way that best works for them while still reaping the benefits of automation.
In addition, it’s best to not pass on additional fees to your vendors. When monitoring vendor scorecards, reward your top performers. Oftentimes, when working with vendors that carry the same items, you can source items to the top vendor, as they have a proven record for fulfilling orders in a timely manner, thus guaranteeing a better user experience for your customers.
Work in Real-Time
Ensuring inventory updates are exchanged in real-time is imperative, as it minimizes the risks of selling an out-of-stock item. Real-time shipment updates also enable a more desirable customer experience (CX) with instant visibility to tracking and parcel and freight movement. In many cases, updates can also alert you to the lack of shipment movement, indicating that shipments may miss their Estimated Delivery Dates (EDD).
If there is something wrong with an order, your team and vendors are updated immediately and can proactively handle a remedy before a customer is made aware of the issue and needs to contact customer service. [Learn why 83% of customers won’t return after a poor delivery experience.]
Having a solid merchandising strategy coupled with data helps to guide your assortment strategy. Just because you can sell couches, chickens, novelty sweatshirts, and laptops doesn’t mean you should. Expand upon your core products, which you can quickly find by reviewing your reports, and offer complementary inventory that pairs well. If you specialize in footwear, adding socks, slippers, shoelaces, shoe cleaner, etc., a stong merchandising strategy can help to build a bigger shopping cart and result in more sales.
Based on your customer data, you can get creative with how much you expand your offerings. While Best Buy is notorious for selling sound systems and TVs, they’ve recently begun offering furniture so shoppers can build the home theatre of their dreams, or redecorate their master bedroom to match the new flat screen. Whatever direction you choose to take your merchandising strategy, be sure to monitor analytics and ensure you’re best serving your customers.
Invest in the Right Drop Ship Technology
When implementing or restructuring your drop ship program, investing in the right technology to manage it is a key component to success. A good partner will provide your team with necessary data, your vendors with attractive integration options, and help forge new relationships so you can grow your network with trusted vendors and brands.
When managing a drop ship program, we see success as being directly tied to giving customers the best possible user experience. With modern technology in place, you can ensure prompt delivery, minimal risks and order issues, and ensure your customers won’t receive the dreaded ‘canceled’ email when purchasing an out of stock item that wasn’t marked as so.
As the digital commerce industry continues to thrive, implementing drop shipping is a great way to keep up with the growth trend and delight your customers with new product offerings.
Convey and Logicbroker partner together to help companies automate and optimize the drop shipping process. Learn more about Convey’s partnership program, ConveyPlus here, or learn how Convey and Logicbroker saved BBQGuys.com in carrier costs and time.