Shelf-space is dwindling. Due to the onslaught of shuttered bricks-and-mortar, retailers and brands are being charged with elevating digital commerce channels. This has resulted retailers expanding online presences to encompass marketplaces, in which third-party vendors are invited to sell product directly through a retailer’s platform.
This is a quick fix. What may improve traffic and sales in the short-term will not translate to long-term consumer loyalty or preserved revenue gains. Shoppers will go where the best product — and deals — can be found.
Instead, drop-shipping company, RevCascade cofounder and chief executive officer Josh Wexler and the company’s other cofounder, Andrea Tobin, illuminate the benefits that can be secured within the method. Under this approach, retailers only buy inventory from wholesalers once a consumer purchases a product. This heavily reduces overhead from warehouse costs to stocking brick-and-mortar shelves.
Here, the executives discuss the pitfalls with marketplaces and how to enter a drop-shipping approach.
WWD: Traditionally, mid to high-end brick-and-mortar retailers have struggled with limited shelf space and inventory issues, yet are trying to compete with Amazon, Wayfair, Farfetch and Rakuten. What are some of the opportunities for retailers and brands?
Josh Wexler: Marketplaces are the dominating e-commerce business model. Amazon sells 400 million-plus products. Wayfair sells eight million-plus products. However, a true marketplace approach for mid to high-end retailers will erode your brand. The far better alternative is drop-ship, as it keeps the retailer in total control of the brands they work with and the products they sell. Curated drop-ship programs are a force multiplier for retailers and the brands they carry. A curated drop-ship program give retailers the ability to sell the right product to the right consumer at the right time, generating more revenue without carrying more inventory.
WWD: What are some benefits of deploying a successful drop-ship program?
Andrea Tobin: The biggest benefits start with more revenue and more profit for retailers and brands, as well as zero inventory risk for retailers. E-commerce growth is accelerating; stores are closing; there is less shelf space, and there is less open to buy. Drop-ship is low-risk innovation with major revenue and profit upside.
Drop-ship also gives retailers the ability to test new brands and products, broaden product assortments in existing categories, and move seamlessly into adjacent categories and markets. For vendors, drop-ship deepens retailer relationships, is a great way to experiment with new retailers, and maximizes consumer reach by selling your products across a wider array of retailer e-commerce sites.
WWD: What are the key differences between a drop-ship program and a marketplace?
J.W.: In a drop-ship program, retailers stay in complete control of the brands they work with and the products they sell. World-class merchants curate the best drop-ship programs — just like the best brick-and-mortar stores. This is the key difference between a drop-ship program and a marketplace where retailers can enhance and extend what they offer to their consumers while staying true to what they have delivered to consumers via their traditional wholesale business.
WWD: What are the benefits of a drop-ship program for retailers and vendors for holiday shopping seasons?
A.T.: With many predicting that e-commerce holiday sales will eclipse brick-and-mortar sales for the first time this year, drop-shipping is a way for retailers to capture more revenue. There is a clear relationship between the number of products retailers have available to sell via e-commerce, the amount of traffic they generate to their e-commerce site, and their e-commerce revenue. A retailer who stocks 1,000 products based on their wholesale buying business model during the holidays can easily offer 10,000-plus products via their drop-ship program, which will result in doubling or tripling their e-commerce sales with zero inventory risk.
WWD: How can retailers optimize their existing buying strategies, skill and expertise?
J.W.: The best mid to high-end retailers are known for their point of view, and for their ability to find amazing products from great brands. Consumers show their appreciation of the inventory selection by purchasing from those retailers. Great merchants are great editors and merchants, which will drive success in drop-shipping — just like they have driven success via traditional retailers’ wholesale buying business model.
WWD: What do you think will happen in 2018 as it relates to both drop-ship and marketplaces? Do you see widespread adoption? Why or why not?
J.W.: In 2018 drop-shipping will continue to be the fastest-growing revenue stream for mid to high-end retailers. Retailers need to generate revenue and profits without increasing their inventory, and drop-shipping is the perfect solution to drive a brighter future for retailers big and small.
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