Do You Know What to Look for in a Retail Drop Shipping Partner?

Established brands who are launching or running a drop shipping operation will most likely partner–at least initially–with the retailers they are currently doing wholesale with.

Drop shipping, however, swaps the traditional commit-to-buy discussion with a commit-to-integrate one. As such, it requires an entirely different skill set than wholesale.

As a program scales and gets more complex, therefore, it becomes more and more important to choose retail partners who will help smooth the gears of your operation rather than throw wrenches into it.

But what would such a retail partner look like?

Here are a few important factors to consider:

Your Brand

Does it matter where your brand is seen and sold?

For many suppliers and brands this is not an issue. They see their products as mass market and want them available through as many channels as possible to get the greatest amount of exposure. It therefore doesn’t matter if their retail partners have dozens of different websites and use Amazon, Walmart, Ebay and other marketplaces for selling products.

Other companies, however, have built their brands around particular reputations that must be maintained. If this is the case with your products, then you should only work with those retailers who preserve the quality of your brand.

This is especially true considering that there are now thousands of resellers eager to game every marketplace and marketing channel to turn inventory, and you might not want to be associated their tactics. These include writing fake reviews, embellishing content, setting bad expectations, and selling forgeries–all of which could reflect poorly on your brand.  

Partnership

Both industry and academic research stresses the fact that cooperation and coordination between supply and retail partners are vital to drop shipping and ecommerce:

“Most of all, the retailers and suppliers must work with each other to assure that drop shipping is profitable for both parties . . .”

“Modern retailing technology depends on the close coordination of interdependent agents in the supply chain.”

“Successful e-commerce also requires quick and accurate order fulfillment, necessitating that e-tailers work closely with their suppliers on product availability, order processing, transportation, and other logistics issues.”

“Better integration of systems and data sharing between retailers and suppliers can greatly improve individual supply chains.”

Such close coordination, cooperation, and even integration with your retailers requires a strong partner mindset. For this reason, I never use terms such as “vendor” and “customer” when referring to suppliers and retailers in my writing. The stress on partnership is intentional.

A partnership oriented retailer will:

• Provide you with expectations and predictability around volume, including not only clear communications about regular ecommerce but also flash sales and longtail products
• Be interested in ongoing strategic discussions about how you can work together to increase revenue for both parties
• Take your concerns and requirements into account in their technical decisions
• Be interested in including your input in their merchandising

Meanwhile, retailers who aren’t interested in cooperation and partnership will:

• Be excessively focused on top-down compliance enforcement and penalties
• Give indications that they are planning to stop wholesale with your brand in favor of moving into drop shipping
• Not be interested in understanding how supply side fulfillment works in drop shipping

Such overly controlling and litigious retailers can be an endless source of frustration, tension, lost revenue, and overhead.

Technical Capability for Robust B2B Communication

In order to coordinate and cooperate, you also need to be able to communicate with your retail partner. It will not matter that you have the most advanced B2B communication tech stack available if your retail partner is slow or unable to send and receive data due to their own outdated tech.

There are still way too many major retailers whose legacy systems take hours to acknowledge inventory data updates. This causes serious issues for drop shipping suppliers, who need such updates acknowledged in real time to avoid cancellations, late shipments, and other costly customer service blunders.

Modern B2B data technology solutions are therefore vital for successful trading partnerships.

Here are some of the capabilities that you should look for in your retailers:

Basic Must Haves

• Ability to communicate with your system in terms of data formats, transmission methods, and protocols
• Reasonable (or free) B2B data solution fees for suppliers (there are few greater impediments to data exchange than solution providers that act like tollbooth operators solely focused on collecting tariffs on data)
• No major latency for inventory updates in the retailer’s e-commerce environment. Inventory feeds should not take longer than 30 minutes to reach an e-commerce platform once it is received from a solution provider
• Solution onboarding time of less than two months. Three to six months or longer is a major red flag

Intermediate Great-to-Haves

• Data analytics to help improve and coordinate operations and logistics
• Visibility into your retailer’s logistics
• Clear assessments of retailer performance such as orders sent late or cancelled too often
• Red-flag systems that pinpoint and send immediate warnings when breakdowns occur
• Auto-decrementing systems that can provide real time probable inventory levels to both you and your retail partner
• End-to-end order visibility from inception to receipt by customer

Extremely Advanced Wish-We-Could-Haves

• Volume predictive mechanisms
• Machine learning that algorithmically recommends adjustments to shipping
• Ability to prevent oversells and cancellations before they happen based on intelligent pattern recognition algorithms
• Ability to harness data intelligence for inventory forecasting

(Some of these capabilities still don’t exist yet but are the future of supply chain intelligence. That’s why Dsco is taking steps to be at the forefront of developing them.)

Bottom line, a good B2B data solution will not only allow you and your retail partner to exchange large sums of real time data but to mine that data for insights on how to improve both partners’ logistics, operations, and collaboration.

This is the only way to make sure that a strong partner mindset translates into a robust reality on the ground.

The ROIs of Partnership

Finding the right retail partners to drop ship with will lay a solid foundation for the growth of your operation. Some of the ROIs you might reap include lower cancellation and return rates, lower oversell risk, lower data exchange overhead, higher volume with reasonable predictability, more inventory turns, quicker times to shipment, less tax liability, the ability to bring products to market faster, lower production and logistics costs, and hopefully, increased sales and marketshare.

In next week’s post I’ll look at what type of products work best for drop shipping.

Azad Sadr is Dsco’s head of industry research and content development.