What Manufacturers Need to Know About Drop Shipping


December 16, 2020

One of the most conspicuous traits of today’s business landscape is that customer expectations seem to reach new heights with every passing month—and this is especially true when it comes to shipping speed. Amazon has set the bar high for online retailers, getting goods into consumers’ hands so quickly that it has created a whole new paradigm for product delivery. And in the wake of the COVID-19 pandemic, it has become especially clear that ultra-fast delivery will be a big part of the new normal going forward.

So how are retailers coping with the need for speed? They are turning to more manufacturers who can drop ship products directly to customers.

Drop shipping partnerships between manufacturers and retailers are definitely on the rise. One report found that the global drop shipping market was worth nearly $102 billion in 2018, and is expected to register a compound annual growth rate of nearly 30% by 2025. That presents a big opportunity for your manufacturing business to increase revenue and grow.

You might be thinking that adding drop shipping to your business is simply inviting chaos. Wouldn’t it just add a lot of complexity to your supply chain and operations?

The short answer is no. Not only do the benefits of drop shipping far outweigh the challenges, but it can also be much less of a juggling act than you think if you have the right technology in place to streamline your processes. Here are a few reasons why the time is ripe to start drop shipping for retailers.

Drop Shipping Puts You in League with Industry Giants

Drop ship programs represent a huge opportunity for manufacturers to grow their businesses fast because they can connect you with top retailers like Walmart, Target, Home Depot, and hundreds more. They can also connect you to the big players in online marketplaces, like Amazon and eBay.

Manufacturers already working with these giants can also benefit by expanding their presence from store shelves to eCommerce websites. Plus, while in stores retailers are limited by shelf space, online there are no such limits. A drop shipping relationship eliminates key barriers to growth, because the inventory stays with you until it is ready to ship directly to the consumer.

When relying on manual processes, it can be difficult to toggle between the needs of a variety of retailers with well-established brands. Between printing compliant packing slips and branded shipping labels for each retailer, meeting delivery windows and sending required documents back and forth, you can quickly get bogged down in repetitive, error-prone data entry.

That’s where electronic data interchange (EDI) comes in to play. EDI acts as a bridge between your systems and those of your trading partners so you can automate transactions and the exchange of documents like POs, ASNs, and Invoices. Using EDI makes it possible to seamlessly add hundreds of trading partners without having to overhaul your core systems or add a lot of new staff. A well-designed EDI solution can enable you to add new trading channels in days, not months, and allow you to do business in all directions—accurately and efficiently.

Whether you are looking to begin new trade relationships or enhance your existing relationships with retailers who are expanding online, drop shipping gives you a valuable opportunity to grow your product catalog. The virtual “endless aisle” of today’s eCommerce landscape is a win for everyone: Customers have a broader range of choices, retailers can sell more, and you can create new revenue streams. Because retailers don’t have to stock your products, you can boost the availability of your larger or more expensive items. You’ll also be able to test the viability of new products, without requiring large investments from your retail partners.

Drop shipping solutions don’t just apply to the big players in the eCommerce space either. The efficiencies you gain will make it easier to forge new partnerships with smaller and specialty retailers as well. There are programs you can join that will connect you to businesses of all sizes, worldwide.

You Will Reach New Audiences with Your Products

Drop shipping relationships powered by an efficient EDI solution allow you to cast a wide net, introducing your products to multiple customer demographics and locations at once. With drop shipping, the only limit is your ability to deliver; as long as you can fulfill orders on time, you can sell your products anywhere eCommerce is used.

Another benefit is the ability to quickly respond to demand changes. For example, if demand for products from a specific retailer spike suddenly during the holiday season, you won’t be delayed by replenishment lead times for stores. You’ll be ready to fulfill orders automatically, accurately, and consistently despite the increased volume, and you won’t have products sitting idle on less popular store shelves.

EDI gives you complete operational visibility from order placement to final delivery, and the ability to share inventory data in real time with your partners. By automating EDI transaction exchanges with your fulfillment partners, you’ll be able to ship products quickly and accurately, while remaining compliant with retailer mandates. As a result, end consumers will have a superior customer experience no matter how much business is booming.

This kind of scalability is only made possible by seamless connectivity across multiple channels. If you choose a cloud-based EDI system to support your drop shipping operations, it gives you even more flexibility to grow. A reliable solution will allow you to see all your drop shipping activity and numerous partnerships, from big-box retailers to niche-market companies—in one, unified portal.

You Can Leave the Marketing to the Retailers

Another advantage of drop shipping for your trading partners is that it allows you to profit from their considerable marketing resources and budgets. For example, Walmart spent a whopping $3.5 billion on marketing last year. Amazon topped that by spending more than $10 billion on ads alone. Doing business with such marketing powerhouses—and those attempting to compete with them—gives you maximum exposure for your products. All you have to do is provide quality items and well-branded product information, and you’re good to go.

Take a Step Toward the Future with Drop Shipping

It’s clear that drop shipping is on the rise and that customer expectations for product variety and speedy delivery are too. Seizing the advantages drop shipping offers your manufacturing business will not only earn you more revenue, but it will ensure your company’s longevity in a constantly shifting eCommerce landscape.

If you are interested in learning more about the benefits of drop shipping for suppliers, fill out our contact form. One of our specialists will reach out to you to uncover ways we can help your business grow its drop-shipping capabilities.

Author the Author: Ryan Tierney is the VP, Product Management focused on Integrations at TrueCommerce. He has spent the last 16 years with TrueCommerce in various roles with services and Product Management. He and his team are responsible for the TrueCommerce TC.Net platform, Business System and Channel Integrations as well as Trading Partner Mapping. Ryan enjoys spending time with his wife and 3 sons and in his spare time enjoys golfing.

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