Three ways retailers can partner with vendors to drive drop shipping success

by | Jul 18, 2019 | Retailers

When done right, drop shipping is an ideal way for retailers to expand their product assortments, reduce shipping costs and delight consumers — all with little capital expense. On the other hand, poor drop shipping execution can create a sub-par customer experience and put a retailer’s reputation at risk.

Also known as direct-to-consumer shipping, the concept of drop shipping is simple: suppliers ship product directly to the end consumer on the retailer’s behalf without going through a distribution center or a store. However, meeting consumer’s exacting expectations is not a simple task. Retailers must partner closely with their vendors to automate drop shipping and create the experience consumers expect for fast delivery, detailed product information and real-time visibility.

Here are three best practices that retailers can use to foster drop ship success.

1. Define your vendor requirements & expectations

Retailers typically have well-defined processes for vendors that ship to their distribution centers, but shipping directly to consumers poses different requirements that are even more critical to clearly define.

Here are some questions to ask yourself about how your organization will work with vendors to automate drop shipping initiatives:

  • Who will pay for shipping? Do I want my vendors to pay? Or do I want vendors to use my negotiated freight agreements?
  • What are my expectations for receiving inventory information? How often do I want updates from vendors? What information do I need?
  • How quickly do I expect vendors to acknowledge orders?
  • How will I provider visibility into shipments to my customer service team so they can respond to inquiries from customers?
  • Do I need shipping documentation that creates a consistent experience with my brand?
  • How will I handle returns?
  • Will I need a new vendor guide for drop shipping?
  • How will payment terms change for drop ship vendors?

The answers to these questions will help you define your expectations for exchanging information with vendors about forecasts, inventory, orders, shipments, returns and more—and set all parties up for success.

 2. Rapidly onboard & enable vendors

 The best place to start with finding drop ship suppliers will likely involve tapping into your existing base of vendors because they already have a trusted relationship with you. In addition, you’re most likely not carrying the full breadth of their assortment, which can help round out your product offering for customers. Working with these suppliers to become drop ship capable can often be more efficient than onboarding net-new suppliers.

Next, determine how you’ll onboard vendors to your drop ship requirements. Depending on the size of your vendor community, the vendor onboarding process can be impractical for an in-house vendor management team to handle. It can also be difficult or impossible for an in-house team to validate which vendors are truly drop ship capable.

Many retailers rely on a third-party expert to validate which suppliers are drop ship capable, conduct vendor outreach, get vendor buy-in, and guide each supplier through testing and certification on specific requirements. In addition, these companies provide access to a full-service team that works with vendors to ensure ongoing compliance. A vendor onboarding partner such as SPS Commerce has the expertise and staffing to focus solely on this task in the desired timeframe, and can typically achieve 80+% vendor compliance within 60 days.

3. Track vendor performance & improvement

Managing a drop ship initiative should be seen as an ongoing journey, not a one-time event. Once vendor onboarding is complete, scorecard vendor performance using key performance indicators that are aligned with your unique definition of the “perfect order.” The vendor scorecard includes attributes like inventory accuracy, fill rates, order accuracy and order completion. It’s critical to hold your vendors accountable for these measures because your customer will look to you when things don’t go as expected.

Using this vendor scorecard data, both you and your vendors can identify any issues and continuously improve the effectiveness of your drop shipping program.

The Direct-to-Consumer Journey from the First Order Through Automation

The Direct-to-Consumer Journey from the First Order Through Automation

We surveyed some of our experienced drop ship customers and are sharing the findings through a research report.

Brandon Pierre