At its core, commerce relies on bringing together willing customers with the products they want. With more places for customers to find those products, drop-shipping models fuel many of the largest retail and marketplace websites. The result: more goods in more places (extended assortment for retailers and expanded sales channels for suppliers), which has benefits — and challenges — for both sides.
In our new report, “The Definitive Drop-Ship Guide For Brands And Retailers,” my colleague Sucharita Kodali and I outline the benefits of adopting a drop-ship solution, how to ensure that your tech stack supports a successful program, and how to evaluate drop-ship opportunities based on your business objectives.
What Is A Drop-Ship Program?
Drop shipping is a scenario in which a merchant (retailer or marketplace website) sells a physical product to a customer and a separate supplier fulfills the order directly to the customer from the supplier’s owned inventory. This model differs from the traditional retail model, in which a brand supplies wholesale inventory to a merchant and the merchant markets and fulfills that owned product directly to the customer.
What Does A Successful Drop-Ship Model Look Like?
- For retailers: Selling non-owned inventory creates potentially higher margins, provides customers with more selection, serves as a testing ground for new products, and is a nearly risk-free way of selling unproven or slower-moving products.
- For brands and suppliers: Drop shipping increases exposure and expands sales channels. It may also offer deeper control over the way the brand content is presented.
How Do Technology Partners Enable Efficient Drop-Shipping Practices?
Vendors automate the flow of data and business processes in four areas:
- Connection brokering to connect suppliers with merchants and avoid managing custom connections for each new drop-ship relationship.
- Product information to create the digital product on each merchant’s website.
- Pricing and inventory, which change frequently and require near-real-time adjustments.
- Order and status updates so that suppliers can ship, end customers are informed, and both partners can track the current stage of each order.
This report identifies the “flavors” of drop-ship scenarios to help you jump-start evaluating potential drop-ship models and vendors that align with your business goals.
Interested in finding out which flavors are best for you? Schedule an inquiry with me, and keep an eye out for future drop-ship research.
(written with Brandon Shaik, research associate)