The Marketplace Model: Drop Shipping for Grown Ups

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The best market indicator for Ecommerce success is the overall customer experience delivered. Consumers today thoroughly research retailers and products before making a purchase. Having the lowest price or best product no longer guarantees you a sale. When it comes to shipping, customers want affordable prices, flexible shipping options, and fast delivery. According to the MetaPak Delivering Consumer Choice survey, 66% of shoppers bought goods chose one retailer over the other because the delivery services offered were more appealing. Again, 96% of the same shoppers said a positive delivery experience would encourage them to shop with the same retailer again.

The Stats
Drop Shipping Fact #1: 22-33% of Internet retailers have adopted drop shipping as their primary method of order fulfillment.
Drop Shipping Fact #2: 84% of online sellers find that establishing a drop ship supplier relationship is the #1 roadblock to starting an online business.
Drop Shipping Fact #3: The average profit of a manufacturer who drop ships is 18.33% higher than a manufacturer who uses traditional channels.

Enter the Drop Shipping Zone
A good shipping experience builds your brand, grows customer loyalty and solidifies your market leadership reputation. In this blog post, you will learn how marketplaces radically transforming the answers to these often asked consumer questions: How quickly do you deliver your eCommerce orders? How many delivery options do you offer? What do you charge for shipping? Is your shipping reliable?

Traditional drop shipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.
When you sell products on your commerce website or marketplace, then your online reputation relies heavily on the performance of your suppliers. You need top notch drop shippers to maintain your reputation and grow your business. A bad drop shipper, for example, can cause losses in terms of inflated wholesale prices and unnecessary fees.

The biggest difference between drop shipping and the retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party–usually a wholesaler or manufacturer–to fulfill orders. Traditional drop shipping for most retailers comprises of a few select vendors for a few selects items or a single category. Scaling this model becomes difficult for practical reasons. It is time consuming to on-board new vendors.  In the old model, the retailer operating a traditional drop-ship model absorbed the costs the losses and the pain when it came to adding new supply partners. The onus of the catalog and product management rests on the site operator. Customer feedback, on the other hand, rests with the seller.

Marketplaces are the Natural Heirs
Marketplaces are natural heirs to drop shipping. The marketplace model enables the seamless integration of back-end processes and systems with multiple suppliers that you get with a marketplace. Marketplace technology is typically harnessed through the cloud on a software-as-a-service basis and it is readily available for retailers. They can be managed by the retailer itself or by the provider, providing an overall Ecommerce experience that is secure and focused on the customer.

Through marketplaces, you can rapidly on-board new sellers. You can also ensure that your seller network takes ownership of the catalog management, since the inventory rests with them. Feedback from consumers is much easier to access and respond to within set timelines.

Consider this: A commission is applied rather than a resale margin because the stock does not transfer to the retailer with a marketplace model. The scope for expansion is better. The potential for profit growth is high. At the same time the risk is much lower, because the retailer no longer processes inventory or invests in individual partner integration.

The Road Ahead
The closing words belong to Adrien Nussenbaum, CEO, Mirakl: ‘a marketplace can be used to complement or replace the drop ship model, bring far greater scalability, flexibility and profitability. By connecting sellers and customers directly, online marketplaces build create value while reducing the chain and benefit all parties – the seller, the retailer and the consumer…Furthermore, Forrester notes a number of strategic benefits for retailers when adopting a marketplace, such as incremental revenue and margin, improved customer service, and a new way to test and feature products that are otherwise restricted’.

Marketplaces empower the retailer with control over the entire Ecommerce process. They get to decide what products are offered, and how transactions and communications take place at all times. This means they can offer customers the exact service levels on their marketplace that they deliver in their regular online store. The retailer also has more control over after-sales care too, compared with a drop ship scenario. Marketplaces are the new fulfillment of the Ecommerce promise begun in the early 1990s.

McFadyen’s marketplace solution can help you quickly deploy a robust marketplace with an increased catalog, better customer insights, and easy drop-shipping /fulfilment by third parties. If you would like to learn more about McFadyen’s marketplace solution, write to us at engage@mcfadyen.com or connect with us on Twitter @McFadyenDigital

Sources

Forbes on Drop Shipping
Mirakl on Drop Shipping
Shopify on Drop Shipping
McKinsey on Global Flows
Directory of Drop Shippers
Mirakl on Best Buy Marketplace
Americommerce on Drop Shipping
Shopify on Global Ecommerce Markets
MetaPak Delivering Consumer Choice survey
Retail Gazette – Marketplaces are Drop Ship’s Natural Heir

 

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