Dropshipping: How to Find the Best Partner for Your Brand
Winning in ecommerce means meeting consumers where they are. The explosion of retail marketplaces gives consumers control, convenience and choice to buy what they want, how and where they choose. In fact, consumers rated convenience (66%) and assortment (52%) as the top reasons they shopped at a retailer, per Catalyst and Kantar research. Dropshipping fulfillment enables retailers to offer that wider selection to customers without the overhead costs of storing, packing and transporting inventory. Brands, too, gain efficiencies, sales and insights. Dropshipping has tremendous upside for your ecommerce strategy, but it’s critical to find an experienced third-party logistics (3PL) partner that can manage the technology and data complexities of these relationships. Read on for the benefits of dropshipping and how to find the best retail dropship partner for your brand.
What Is Dropshipping?
Dropshipping refers to both a marketplace transaction and a method of fulfillment. At its simplest, dropshipping enables retailers to sell products that they don’t physically have in stock. Rather, customer orders and fulfillment are outsourced to a third-party (or the brand itself) to send those items directly to the consumer. The consumer receives their items and is none the wiser about how they got to them.
What’s in it for a retailer? Dropshipping eliminates the logistics headache for a retailer. With no inventory to store, pick, pack and ship, a retailer lowers its overhead costs and frees up space. Increased competition, inventory constraints and supply chain issues make dropshipping a supremely attractive proposition for retailers. They sell products and wash their hands of the rest.
Dropshipping enables retailers to sell products they don’t physically store.
If you sell online today and work with a 3PL, you may already have a potential dropship partner in the mix. Dropship transactions execute similarly to how a 3PL fulfills DTC on your own site or Amazon. Not all 3PLs offer this service but it’s well worth the conversation as there are a host of benefits to consolidating your inventory with one partner. Be forewarned that any dropship partner you choose must be tech-savvy to manage the various integrations and data flow retailers require. Unfortunately, there’s no dropship requirements standardization across retailers, so every setup and execution will be somewhat bespoke.
Dropshipping Benefits to Brands
Despite the complexity, dropshipping can boost your brand’s awareness and sales without the risks inherent to traditional retail or relying on a single channel.
Be (every)where consumers are. Quickly expand your brand presence in multiple marketplaces with no or a low cost of entry. Shoppers rely on a number of sites throughout the purchase journey, for inspiration, discovery, research and price comparisons.
Lower your overhead costs. Storing your inventory on your own or with your existing 3PL eliminates the upfront capital investment to package and transport inventory into stores. An added benefit is the ability to grow your catalog quickly, unhampered by resources needed for in-store negotiations, financing or physical labor.
Increase inventory flexibility. Dropshipping enables you to sell products in many places where those items don’t have to physically be. Inventory pooling with one 3PL, for example, offers economies of scale you’d miss out on by sending products to a variety of different places from a variety of different vendors.
With dropshipping, brands can drive sales everywhere your customers shop but centralize product in one place.
Maximize the sale where it’s happening. Because you’ve centralized inventory, you can fulfill consumer demand where it actually is, no matter the marketplace. Product never sits idly on shelves but moves when and where it needs to go. Another reason to consider a single repository for all your inventory is that out of stock becomes out of the question as you’ll have transparency into product levels at all times.
Learn more about your product’s appeal. With a digital presence, you can configure product combinations in a number of ways, without having to physically assemble the items. Build variety packs or dynamic kits to see what sells, to whom and where. This intel can inform what you sell exclusively on your own branded site versus reserve for marketplaces or physical stores.
Control unboxing. Dropshipping, unlike in-store fulfillment, offers transparency and control over your product offering. Add branding to the box if permitted, safely pack products and include interior messaging to further personalize the unboxing experience and upsell other products in your catalog.
What You Need to Know When Working with Retailers
Every retailer manages dropshipping in its own unique way. Unfortunately there’s no “on” switch to enable fulfillment. Rather, retailers require individual contracts with brands in order to enable dropshipping. This contract negotiation must be initiated and managed by the brand versus a 3PL. Why? Retailers care about their brand as much as you do. Their requirements and standards are intended to protect the consumer experience and the company’s reputation.
Entry: As you might imagine, demand to get into the most popular marketplaces is fierce. As a result, some dropship programs are difficult to get into. Negotiations can be taxing and complex so make sure you understand — and can meet — all requirements upfront.
Requirements: Each retailer has its own technical integration to collect orders as they’re placed, configure shipping per their specifications and sync inventory to avoid overselling. This technical lift along with any rules around packaging, shipping speeds and even your inventory locations will impact which dropship partner you choose.
Returns: What are the retailer’s expectations for managing returns? Walmart sends returns back to the shipper but Amazon dropshipping receives the product. What happens to those returned items? Find out if they can be resold or are discarded. You’ll also want to check that the 3PL you choose can manage returns, regardless of channel.
3 Critical Questions to Ask a Potential Dropshipping Partner
The right dropshipping partner is as important as being in the right marketplaces. Do your due diligence to ensure a positive brand experience and good standing with your retail partners. Here are three critical questions to ask any potential dropship partner, whether it’s your existing 3PL or a new company.
What are your technology, process and reporting capabilities? Establishing seamless technical connections is the first step. These can be detailed and varied per marketplace. Some retailers use a whole host of APIs while others rely on highly complicated electronic data interchange (EDI) transactions. How sophisticated and tech fluent is your potential partner? Ask for examples of how they receive orders and accurately sync inventory to the marketplace. Do they have dedicated teams working on and troubleshooting integrations and information workflows? Dig into their billing and invoicing processes as well, especially if your company requires integration with an enterprise resource planning (ERP) system.
Must-haves for a dropship partner, technical savvy to:
> Sync inventory
> Integrate anywhere
> Troubleshoot workflows
What carrier options do you provide? A retailer may specify which carriers you may use along with shipping speeds. Finding a 3PL that already dropships to your retailer is a good place to start. In addition to carrier flexibility, your dropship partner can offer greater influence in carrier negotiations and volume discounts that brands can’t achieve on their own. A carrier-agnostic partner like Whitebox for example, can get products closer to customers and save you money by easily shifting to the best shipping option per order.
Where do you ship from? Shipping compliance differs with each retailer. For Amazon, the experience needs to feel the same for the consumer so ship-by dates are stringent. Where your inventory is located also matters to retailers. If your product is too far from customers that will impact the transaction price. Make sure your 3PL has strategically located warehousing facilities across the U.S. to get your products as close and fast to customers as possible.
Reach Your Customers Where They Shop
Dropshipping is a fantastic way to expand your presence to undiscovered customers with minimum resource commitments. Whitebox can help you realize all of the rewards of a dropshipping partner with none of the pain. Consolidate your omnichannel sales and fulfillment with one powerful partner. Strategically placed warehouses pool inventory to determine optimal packaging and shipping across six carriers, while saving you money. Experienced in integrations and data syncs, we connect directly to your dropship retailer(s) to transmit all order, fulfillment and inventory information to offer a complete view of sales. Our high-tech, data-driven approach provides worry-free fulfillment and the kind of brand experience you’d deliver. Contact us to learn more about dropshipping or schedule a free consultation.