Rise of the Marketplaces: Drop shipping and Marketplaces together

by | Nov 30, 2017

Thanks to companies like Amazon, Overstock, and Wayfair, e-commerce marketplaces are becoming a popular way for both retailers and suppliers to reach new customers without a lot of capital outlay or overhead. It doesn’t require additional marketing expenditures either, as the marketplace takes care of promotion of the products on its site. Fulfillment for marketplace orders are typically handled by the seller themselves; or pallets of the product can be sent to the online marketplace for fulfillment from their warehouse (like Fulfilled by Amazon Retail).

Today I’d like to talk about the advantages of combining marketplaces as a sales channel with drop shipping as a fulfillment model. For retailers and vendors alike, it can be like multiplying your efforts. Having both channels open to diversifies your sales and delivery models, helping you serve your customers and maintain, or even increase your market share.

How retailers can combine marketplace with drop shipping

We’ve talked previously about how selling on a marketplace is a relatively cheap and simple method for retailers to easily add a new sales channel. Adding drop shipping is a similarly less expensive strategy for retailers to add inventory and shipping capabilities without additional overhead or building infrastructure. With a fully integrated system with cross-channel visibility and up-to-date inventory information from your drop ship capable suppliers, you can add items to the marketplace without ever having to worry about acquiring the inventory or dipping into what’s on your store shelves. When the order reaches your system, you can automatically relay the order to your supplier to fulfill and deliver.

Setting up a vendor to fulfill your marketplace orders is also a great way to test new products or suppliers with minimal risk. Instead of buying the new, untested product, you can offer it on the marketplace to see how it sells and have the vendor drop ship it. If the vendor performs well, you can decide to take them on as a regular supplier. If the product sells, you may also want to consider selling it on your e-commerce site and stores.

Vendor advantages for drop shipping marketplace orders

We’ve talked a bit previously about the advantages of marketplace for suppliers and vendors. Enabling a drop shipping program for retailers and their marketplace orders can increase your sales, in addition to making your products more readily available without having to put in the effort on those channels yourself. E-commerce has hit retailers hard, and they’re asking suppliers and vendors to help them pick up the speed and add more options. Offering a drop shipping program to suit all of your retailers needs, whether through a marketplace or through their own e-commerce site, gives you an advantage over the competition who aren’t willing to go this extra mile.

One thing vendors can do for retailers that combine marketplace with drop shipping is to offer branded packing slips. When selling through a marketplace using an option like Fulfilled by Amazon, the retailer doesn’t control any of the inserts and slips that go along with the package – Amazon controls that. As a vendor providing drop shipping for your retail customers, you can offer a service to include branded packing slips with all of your drop ship orders. With integrated EDI, branded packing slip documentation can be automatically populated and easy to print as any of your other packing documents.

Importance of clear, simple return instructions

Clarifying and streamlining the returns process for consumers is extremely vital. Amazon has set a high bar for consumer expectations of online returns processes. Though you may not be able to hand out free return shipping and no-questions-asked refunds like candy the same ways Amazon does, making the returns and refunds process easy can encourage repeat sales. On the flip side, a shoddy returns process and poor customer experience can ensure they never order from you again. EDI automation can be extremely helpful for managing the returns information required for the varied channels and delivery methods incorporated into your sales strategy.

For retailers, the best option consumers love the most is the ability to return products bought online to their local store. If this is at all possible, this should be an option for returning marketplace purchases, whether they were sent from your distribution center or drop shipped. After that, clear returns processes that costs the customers the least money and effort are a close second. That means return labels to wherever you want the item sent should be either included in the package or easily printed. If you charge consumers shipping on returns, they won’t be happy about it so keep that in mind.

For suppliers, you may have to work out the returns process that the retailer would prefer. They may want the item shipped back to you; they may want to be able to offer return to store. They might even prefer to refund the purchase in full and allow the customer to keep the unwanted item instead of dealing with the reverse logistics and costs. Whatever is worked out, the return policy information and return shipping labels can all be included in the branded packing slips and documentation you send with the package.

In the end, retailers (and suppliers) who are new to the marketplace sales channel may want to try a marketplace or two as a way to test the acceptance of new products and product lines, or as a way to move overstock products, or even a way to sell returned and refurbished items. Additionally, combining marketplaces with drop shipping can multiply your efforts exponentially. The combination is a great way to reach new channels, offer the services needed to thrive in the modern retail landscape and satisfy more consumers.

To learn more about how SPS Commerce can help retailers and suppliers find their way into the world of marketplaces or drop shipping, please visit our website at www.spscommerce.com. You can learn more about our different cloud-based solutions, like our product sourcing, inventory management, and even point-of-sale analytics, and how they can help you with both drop shipping and marketplace selling.

Want to get started with drop shipping?

Want to get started with drop shipping?

Learn about drop shipping benefits, fulfillment options and which electronic data transactions make it work.

Scott Bolduc

Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

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