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Q&A: What You Need to Know about Drop Shipping in Today’s Retail Landscape

Shipping and fulfillment, once just a ho-hum aspect of retail, are among the areas seeing the greatest innovation and experimentation these days. Whereas once just getting product to consumers was good enough, today how—and how quickly—orders arrive is what really matters.

One the business side, retailers are paying closer attention to costs even as they focus on providing convenience for customers. That’s what’s prompting many business to expand their shipping and fulfillment methods. Though it’s been around for decades, drop shopping has been gathering steam in recent years, thanks in part to the explosion of new retail business models.

Sourcing Journal connected with Sina Djafari, CEO of drop shipping services provider Duoplane, an e-commerce automation platform that tracks and manages dropshipping orders from device to delivery.

Djafari co-founded contemporary furniture website Design Public in 2003, and out of necessity learned how to code to automate the growing volume of complex orders. This became the basis of Duoplane, which he founded in 2011. Sourcing Journal turned to Djafari to get the scoop on the drop shipping landscape and understand how this fulfillment option benefits brands and retailers.

Sourcing Journal: What trends have been driving the growth in drop shipping?

Sina Djafari: Merchants are looking to specialize and focus. They want to concentrate their attention on marketing, merchandising, and the buying experience—and not on logistics, warehousing and shipping. By using distributed fulfillment, merchants can focus on their core business while also enjoying better fulfillment capabilities than they might be able to build themselves.

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In many ways, it is similar to the trend that we’ve seen on the technology side. Merchants are not software development companies, so they are moving away from custom-built shopping cart software towards off-the-shelf or hosted solutions such as BigCommerce, Magento and Shopify.

At the same time, suppliers and third-party warehouses are building better capabilities. More suppliers are able to ship single orders directly to customers, and 3PLs are investing in advanced warehouse technology. Those fulfillment partners can ship orders faster and more efficiently than ever before.

On the demand side, customers expect the broadest possible selection. When they are shopping, they expect to see every color, size and brand. Offering such a vast selection is nearly impossible without some level of drop shipping. Acquiring customers is expensive; so merchants want to be able to capture them with a more complete product selection.

SJ: How is fulfillment playing a larger role in the customer experience?

SD: The fulfillment part of a purchase is an incredible place to reinforce the retailer’s brand and add to the customer’s experience. It is where the virtual becomes physical.

First, the bar for merely meeting customer expectations is higher today. Customers expect accurate ship dates, faster shipping speeds, and better order visibility. So it is vital to have strong fulfillment capabilities or partners who can help you meet those expectations.

Beyond that, the fulfillment process offers several chances to create a personal connection with the customer. As Amazon dominates the commodity part of the retail landscape, those types of connections are vital.

Communicating with the customer during the packing and shipping process builds anticipation and excitement. Having branded or unique packaging makes the unboxing experience a memorable experience. And offering an easy return process builds trust and goodwill.

SJ: Where are you seeing the greatest interest in drop shipping—among legacy brands/retailers or DTC start-ups?

SD: Start-ups certainly gravitate to a distributed fulfillment model almost by default. Newer companies were born in an era of the cloud, where the idea of owning your own servers and writing your own shopping cart software is unthinkable. They immediately look to ways to bring together the expertise of outside partners. In that way, drop shipping and 3PLs offer similar benefits to cloud computing.

Also, given the resource constraints inherent in most startups, drop shipping provides a way to conserve valuable cash and not have it tied up in inventory and warehouse real estate.

That said, drop shipping has been part of the supply chain strategy of larger merchants for a long time. But we are certainly seeing larger retailers shift more of their operations to a vendor-fulfilled model.

I should also note that we are also seeing a surge of interest in drop shipping from established companies who traditionally have not been in retail at all. We have seen several media companies moving into creating shoppable content. We also see software developers who are selling physical products related to their apps. For example, fitness apps selling fitness apparel and equipment.

SJ: What do you see as the two biggest trends that will be influencing e-commerce over the next five years?

SD: The shopping experience will certainly change. Filtering through a grid of product images is not very compelling anymore. I think those merchants who make their digital experience more interactive and app-like will win. The specific technologies will vary based on the particular product category, but the key is understanding that the shopping experience itself should provide value.

On the fulfillment side, customer expectations are driving innovations in next-day and same-day delivery. I don’t know if we’ll see armies of delivery drones darkening our skies, but those merchants who can reduce delivery times will see much higher conversions and gain market share.

SJ: What are some of the biggest mistakes brands and retailers make with supply chains, and what can they do to turn things around?

SD: One mistake that I see is simply undervaluing the strategic importance of a strong supply chain. Many consumer-facing companies tend to promote leaders with marketing and merchandising backgrounds, and as a result might not provide the attention and resources necessary for world-class fulfillment and supply chain. So it’s critical to have the operational side of the business be represented in strategic decisions and be valued within the organization.

For those merchants who work with outside partners (such as 3PLs and drop ship vendors), I see mistakes with either working with the wrong partners or not having the systems in place to provide a seamless experience to the end customer. Merchants should make sure that they are working with partners who have the same high level of standards for customer experience, are experts in direct-to-consumer fulfillment, and can integrate tightly with the merchant’s own systems.