Evolving consumer buying behaviors have left manufacturers and retailers struggling to adapt to the new demands placed upon them. The increasing popularity of online shopping and home delivery has made it necessary for brick and mortar retailers to adopt e-commerce sites, with the expectation of same-day or next-day shipping requiring order fulfillment models in which the retailer no longer carries the physical inventory and products are shipped directly from the manufacturer (dropship).
Retailers and manufacturers in various stages of the journey from traditional retail to omnichannel retail participated in a research study that revealed the efforts being made to keep up with the pace of change, the technological investments necessary to accommodate the change, and the operational and financial implications associated with this new retail landscape.
Dropship: Challenges and Benefits
For retailers faced with the need to adopt dropship, the biggest barrier is a lack of systems integration (EDI, ERP) WMS, etc.). However, as retailers assume less risk than manufacturers in the dropship model, this is not seen as a prohibitive factor. In fact, 87% of retailers that adopted dropship experienced an increase in revenue.
Manufacturers reported that competing priorities and a lack of systems integration also slightly hindered their adoption of dropship, although again, these hurdles were not enough to keep them from offering this fulfillment method. 66% of manufacturer participants indicated that dropship implementation had already led to increased revenue, particularly those that limited dropship to no more than 40% of their total business.
Despite different pressures and priorities, the research clearly reveals that retailers and manufacturers that have adopted a high degree of electronic integration benefit most from dropshipping, with the sharing of sales forecasts and inventory levels critical to successful collaboration.
The full study Supply Chain Collaboration in Transformative Vertical Industries: Implications of Omnichannel and Dropshipping is available now, but the infographic below provides a quick overview of the findings: