Competition for customers is fierce and they can be extremely fickle and time poor. When customers go to a retailer’s website they expect to see their core ranges and a set of peripheral products that are natural extensions of those ranges. If they can’t find what they want, they will simply go elsewhere. It is in this instance that Amazon wins, and it has cleaned up where retailers have been unable to fulfil customer demand.
One of Amazon’s key attributes is its ability to get product to its customers, fast. Fulfilment is a key battleground and it’s all about who can deliver the quickest. To put this in context, Michael Greeven, MD at DHL Express, said that: “from an ecommerce perspective some might say that Covid brought 2030 to 2020”.
Retailers and logistics companies have ploughed billions to provide extra capacity to fulfil online orders. The amount of UK warehousing space retailers agreed leases for in the third quarter of 2020 soared as they needed room to cope with more online orders. In fact, according to BNP Paribas Real Estate, the take up was 73% higher than the same period last year and take-up of warehouse space has already hit a record high for the year.
Retailers and logistics companies are also ramping up their ecommerce operations ahead of the festive season, to be able to cope with the surge in online demand as consumers continue to avoid shops. Marks & Spencer is to hire 500 extra seasonal staff in online distribution. The Royal Mail is looking to recruit 33,000 temporary staff between October and January, and Amazon is hiring 100,000 seasonal workers in the U.S. and Canada ahead of Thanksgiving and Christmas.
However, despite these positive moves, with the second coronavirus wave surging across Europe and governments reimposing restrictions, economists are expecting unemployment to rise and consumer confidence to drop. Indeed, UK retail sales fell at their fastest pace for four months in October according to the CBI’s distributive trades survey. The environment is only going to get tougher as the virus continues to wreak havoc, and this intensifies the fight for customers.
To survive and thrive through the next couple of months, retailers need to do everything within their power to build customer loyalty. The best way to do this is by setting up a ‘dropship’ channel to ensure they are able to offer customers the full suite of products and extended ranges and ensure there is no supply chain disruption.
Setting up a dropship channel
Dropship allows retailers to access a number of suppliers who fulfil the order directly to the customer, without having to stock the product in their own warehouse. It also enables merchants to fulfil demand seamlessly by being able to turn to new suppliers to scale up ranges and fill gaps in their own inventory. It mitigates supply chain risk, prevents retailers losing sales and fears of ever running out of stock. Even better, dropship can even be switched on as a temporary measure to fill a particular breach in product lines, so retailers can continue to sell until their usual suppliers replenish lines.
However, dropship has many long-term benefits. It can also significantly reduce cost and risk, by passing it on to the supplier or local distributor. For cash flow and working capital purposes, it is therefore transformative. When the item is delivered to the customer retailers get the cash up front and then they pay the supplier.
Dropship enables retailers to be agile
Covid has reinforced the need for retailers to be agile. Lockdown has demonstrated how quickly demand can shift in particular categories. At the outset, of lockdown as people began working from home there was huge demand for printers and home office equipment. As time went on this moved to gym and garden equipment.
Those retailers who have a dropship channel set up were able to scale up to meet growing demand in different areas. Boohoo was a great example. During Spring, the brand typically sells dresses and outdoor clothing. However, with Covid forcing people to sit at home many consumers wanted tracksuits and leisure wear. Boohoo was able to turn to appropriate brands and dropship suppliers to add product categories on their website that they knew would sell.
The retail sector has been one of the most heavily disrupted as a result of the pandemic. But fast-thinking and adaptable firms have been able to capitalise on the disruption. They have adjusted their business models rapidly to meet surging ecommerce demand and deliver extra capacity in a very short space of time. The dropship model has been at the heart of these successes, and it’s only going to grow in popularity across the next few years.
Ed Bradley, director of Virtualstock.