Drop shipping: Is your brand ready?

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Today, more consumers are making online purchases than ever before. More than 79 percent are shopping online and 51 percent use a mobile phone to buy online. If you’re slow to adjust to the new retail landscape, your business will feel the impact. So, what is a brand to do? Drop shipping can be an excellent way to meet consumer expectations and keep costs in check.

What is drop shipping

With drop shipping, retailers sell products that they never hold in inventory. In this model, vendors are responsible for warehousing and fulfilling orders. Here's how it works:

The customer orders from the retailer's e-commerce site.
Supplier fulfills and ships the order, using the retailer's branded packaging materials.
Customer experiences a seamless transaction.
Everybody wins!

When done correctly, retailers increase their product offerings with little capital investment. Suppliers enjoy new trading partner opportunities and increased sales channels.

Getting ready to drop ship

Before implementing a drop ship program, think about how it will affect order fulfillment and team resources.

Drop shipping's increased document flow can tax existing systems and teams. Can your EDI systems and processes support the extra volume? Remember that accurate and efficient documentation compliance for all trading partners is vital. Will you need increased staffing or new technology to handle the influx of order volume? Take the time to evaluate your current resources and technology.

Additional considerations

Returns are inevitable. What's your plan to handle them? Think about the following:

Does the item go back to the vendor?
Will you accept it at a retail location?
Do you want different return policies for different categories?

Create a plan and then clearly state the return policies for consumers. You should also include return information in each drop ship order.

Drop shipping does add complexity to the relationship between retailer and vendor. But with careful planning, both retailers and brands can meet the needs of today’s consumer.

SPS Commerce powers the trading relationships of over 70,000 customers. Want to learn more about how we can help set your brand up for drop-shipping success?