By the end of 2017, online sales figures (of which dropshipping forms an ever-growing percentage) are set to reach $459.07 billion in the US alone. The benefits of dropshipping are highly enticing: no inventory costs, no warehouse costs, no handling returns, and an easily scalable business model.
Even traditional retailers can generate a steady income alongside their branded offerings by selling wholesale products through dropshipping stores. The opportunity to generate just 00000.1% of the forecast revenue figures is tempting enough for any entrepreneur to want to give dropshipping a shot.
From a supply chain perspective, this presents both challenges and opportunities. Here are some of the reasons why dropshipping is becoming the new norm in ecommerce.
Retailers Rethinking Their Supply Chain
As omnichannel retail models present an increasingly seamless shopping experience for customers demanding 24/7 service, retailers are reconsidering their supply chain logistics to meet this increased demand.
Dropshipping streamlines the order and fulfillment process as the products are stored and shipped from a third party, cutting out the middleman, i.e. the retailer. This results in customers receiving their orders faster, and over time, expecting more efficient service from all facets of online retail.
As one the biggest online retailers in the world, Amazon takes speed and efficiency very seriously. After it purchased robotics company Kiva Systems in 2012, the online retail behemoth expanded its robot army by 50%, with other brands expected to follow suit. By 2019, experts predict that the number of industrial robots deployed will increase to around 2.6 million units worldwide. The price of robotics technologies has lowered to such an extent that even medium-sized suppliers and manufactures could afford to invest in machines capable of performing 2,000 hours of uninterrupted work.
Third Party Logistics
Otherwise known as 3PL, the rise in third party logistics companies has become a welcome addition to the ecommerce supply chain industry. 3PL gives brands and dropshippers of all sizes the option to load-balance their goods to suit geographical and seasonal demands. This gives smaller businesses the chance to compete on an even playing field with the major online retailers’ delivery times.
Lower Cost Models For Online Retail
From first-time entrepreneurs to established retail brands, the profitability for many dropshippers lies in the business owner’s ability to test different products for no upfront cost, until they find the most profitable items to sell from their ecommerce stores. The freedom to change goods presents a swift learning curve, allowing business owners to scale up and grow from a few hundred sales a week to a few thousand, all in a very short time.
Also, ePacket delivery allows suppliers to offer free shipping to the USA from countries like China, as the fastest and most economic means of satisfying dropship retailer and consumer demands. The challenge for suppliers is to meet the spontaneously evolving needs of ecommerce with consistent inventory control. Ecommerce apps like Oberlo facilitate fast, easy ordering services. The semi-automated system allows major marketplaces to forecast demand and plan their distribution needs based on collated data from dropshipping businesses across all industries.
Total Redesign of Product Packaging
Traditionally, retailers needed to make their products look irresistible on shop shelves and consumers were used to touching and trying out items before parting with any money.
But with the rise of online reviews, tutorials, and social proof endorsements, businesses can grow trust based on the information customers read online before making a purchase.
Therefore, the priorities for packaging have shifted towards minimal, lightweight designs. Bulky boxes containing lots of unused spaced need to be redesigned so that they fit through standard sized letter boxes. Similarly, the packaging needs to be slim-lined and made stackable for fulfillment warehouses.
Adjustments to labeling may also be required to meet international safety regulation standards and satisfy the customer that the product they ordered meets their expectations.
Further, using environmentally friendly packaging has also become a desired standard for ecommerce brands and suppliers to live up to. Dropship suppliers are continually looking for ways to provide value-added services like this, in order to raise their brands above competitors.
In summary, dropshipping is here to stay. Investment in warehouses and automated inventory systems will be crucial to building trust and maintaining a high standard of efficiency to compete with the major online retailers.
(Victoria Greene is a branding consultant and freelance writer. On her blog, VictoriaEcommerce, she shares her tips on dropshipping and all aspects of ecommerce entrepreneurship.)