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You know that big box retailers like Walmart, Sears, Target, Kohl’s, Kmart, etc., etc. are expanding their presence in the e-commerce world as a means to compete more effectively against more agile e-retailers.  So what advantages do big retailers really get out of making you drop ship?

First, no cost. Retailers don’t need to spend a single extra penny when utilizing drop shipping. All they need to do is get permission to resell your products. 

Second, convenient transactions. Retailers ask the customer to fill out an order form and then submit it to you for sorting and fulfillment. The money will be sent to the retailer who in turn pays you, the supplier. 

Third, abundance of suppliers. Retailers can opt to have as many suppliers as they desire and they don’t have to limit themselves to only one brand. 

Fourth, free storage. With drop shipping, retailers don’t have to worry about having a large warehouse to store products. All they need is a constant connection with prospective customers and, of course, to suppliers for price and availability updates.  

Fifth, effortlessness. Drop shipping is effortless. The retailer does not have to lift a finger or put any extra effort towards handling items. All they need to do is convince their audience to purchase their products. 

While this is great for retailers, there are also advantages to the suppliers working with them as drop ship vendors (DSV).

One of the biggest advantages is your risk as a supplier can be spread across MANY retailers as opposed to big box programs that can end without notice at any time leaving you with unsold inventory and a huge financial loss.

Another advantage is better margins.  In typical big box brick and mortar fulfillment you can get beat down on price with the expectation of making it up in volume.  Unfortunately, that rarely if ever happens – you end up taking lower margins due to allowances.

Lastly, online shopping is a powerful and lucrative force that allows you to be agile and react quickly to market demands, to observe changes and gain a better sense of real-time demand for product making inventory forecasting easier.

Yes, there are still the challenges of managing the internal cost components and complexities of a small drop ship order as compared to a much more lucrative and relatively simple pallet shipment.  However, there are inexpensive tools that drive errors and most of this cost out of the order process.  One example is OPAL. In less than 8 seconds, OPAL automates receiving an order from a retailer, manages all EDI transactions without the cost of a 3rd party EDI provider, processes and invoices the order through your ERP and accounting system, and creates a packing slip and custom branded 3rd party shipping label per any retailer’s requirement.  Once the order is shipped, OPAL also sends back tracking information and the invoice to the retailer, as well as tracking the package and sending inventory updates to the retailer.  So you really can reap the rewards of being a drop shipper vendor.