The retail landscape has undergone significant transformations, with internet retailing becoming a substantial proportion of retailers’ revenue profile, accounting for over a quarter (26%) of total UK sales. As the best ecommerce platforms continue to expand, retailers have had to extend the number of products they sell online far beyond the number of products held within their distribution centers to meet customer demands for more choice and high-quality products.
However, this shift does not signal the end of traditional high street stores. Instead, consumer preferences are evolving towards hybrid shopping experiences, combining the benefits of both online and in-store shopping. This hybrid approach leverages technological advancements in physical stores and improvements in online order delivery times and costs. Customer satisfaction remains central in retailers’ competitive strategy with 96% of shoppers citing that positive delivery experiences encourage repeat purchases.
With brick-and-mortar stores evolving, retailers must adapt their strategies for sustainable growth.
A balancing act
Presently, the retail market is split into two main models facilitating extended online product ranges marketplaces, and dropshipping.
Via marketplaces, buyers and sellers transact directly on platforms such as Amazon or eBay. Marketplace platforms act as facilitators, earning commissions for providing ecommerce real estate. Suppliers don't need to integrate deeply into the retailer's ERP systems, allowing for rapid product range expansion for retailers.
However, there are trade-offs: lower profitability margins due to commission fees, competitive pricing pressures, and additional platform usage costs. Customer experience can also be compromised, as suppliers are not always held accountable to retailers’ order fulfillment standards, potentially leading to delivery delays or product faults - diminishing the branded shopping experience. Additionally, retailers risk diluting their brand identity due to limited product differentiation compared to brands offering a hand-picked range. This is no good when customers desire a rich buying experience both online and in-store.
For customer longevity, retailers must offer a journey of discovery with trusted recommendations of high-quality products. To stay competitive, retailers can build their reputation with a considered selection of goods and a seamless end-to-end purchasing experience.
Enter the traditional dropshipping model. Pre-dating ecommerce, dropshipping was used by DIY retailers to sell bulky items like lawnmowers and garden sheds, alleviating warehousing costs. Via dropshipping, the retailer is the merchant of record, featuring products on their website without owning them beforehand. The retailer purchases from the supplier only after a customer places an order, and the supplier ships directly to the customer.
The benefits are substantial. Dropshipping is a logical solution to grow online sales, functioning as a curated marketplace. Retailers can maintain control over their product range and customer experience by selecting sellers aligned with their brand. Additionally, they can determine the sell price and gross margin, functioning as a low-risk, high-reward model for expanding a product range by outsourcing distribution to a trusted network of suppliers that fulfill orders directly.
Streamlining dropship success with SaaS
Integrating a dropship management software can further enhance this approach. It seamlessly integrates across channels, empowering brick-and-mortar stores to compete in the digital landscape while preserving their brand integrity. Software-as-a-service (SaaS) platforms facilitate a manageable and scalable ecosystem of dropship suppliers, ensuring a curated selection of goods under the retailer’s brand. This enables a personalized shopping experience that nurtures customer loyalty, combining the expansive potential of digital marketplaces with the intimacy of traditional retail.
Technological frameworks like this provide retailers with detailed visibility into stock and order statuses, akin to in-house inventory systems. Enhanced sales reporting and insights into supplier performance further enable retailers to optimize operations. Additionally, multi-vendor management software has the connectivity to provide informed customer journeys, aligning suppliers’ shipping capabilities with retailers’ service level agreements. This integration alleviates the burden on customer service teams by minimizing ‘where’s my order’ calls and complaints.
Retailers leveraging specialized SaaS solutions can flex their agility, adapting to market trends and consumer preferences. As the industry continues to shift, leaders must strategically decide what to stock, dropship, and offer on marketplaces. The key is finding the right blend for all three.
The omnichannel approach for single range expansion
To achieve a scalable hybrid approach, retailers must remodel their back-end operations.
Traditionally, dropshipping was a logistics operation managed by the supply chain within the retailer, while marketplaces were owned by the ecommerce and commercial side of the business. As retailers develop strategies for both, roles are evolving. Warehouse staff are being elevated into the office and cross-pollinated with the commercial side of the business, who are learning logistics metrics like On Time in Full (OTIF) ratings and supplier stock levels. Logistics personnel are also gaining insights into product data and image quality.
The aim of this is to converge these areas into a single range expansion strategy rather than treating dropshipping and marketplace as separate entities. In turn, retailers can draw on the appropriate model that is in line with the specific products and customer preferences. The ultimate goal: to sell the most products, the best products, and in the right way, providing the best possible customer service. This single range expansion provides customers with a cohesive, unparalleled shopping experience with thoughtful recommendations, across multiple retail channels.
By combining dropship, marketplace, and in-stock models, retailers can streamline their back-end operations to satisfy consumer’s changing needs, differentiate themselves against competitors, and supercharge growth. Only by pursuing an omnichannel approach can retailers provide the best in class offering to shoppers and remain committed to innovation for sustained success in the ever-changing landscape.
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