Evolution of the Dropship Supplier
This guide is intended for those who are interested in the different stages of dropship suppliers and how to advance through the stages to be the most effective dropship business.
The “Retail Apocalypse”
According to a Fox Business news article, in 2019, US retailers announced 9,302 store closings, a 59 percent jump from 2018, and the highest number since the data tracking began in 2012. As of January 31, 2020, over 1,200 stores have been closed or are scheduled to close during 2020, which could lead to over 14,000 stores closing in 2020.”
This shows that suppliers, distributors and brands must prepare for their retailers and stores to go out of business unless they can adapt to the world of ecommerce. And in order to do that, they must be able to put certain systems and operations in place to gain and retain more retailers to sell their products online.
The “retail apocalypse” is one of the reasons why suppliers, distributors and brands should be ready for ecommerce, but there are also other businesses that are currently selling online that still need to branch out and evolve into selling through different mediums, such as dropshipping or to other businesses.
Dropshipping
Most suppliers and brands are either new to dropshipping or do not know how to successfully scale their dropship operations.
For suppliers looking to start dropshipping, it can be hard to figure out where and how to start. The first question you should ask yourself is, can you actually dropship? This entails selling and fulfilling individual packages to your resellers’ customers with a printed blank shipping label or your resellers’ logos on the shipping labels. Once you decide your business can accomplish this, you will then need to ensure you put the necessary systems, platforms and processes into place in order to successfully run a large scale dropship operation. Lastly, you will need to build a network of resellers and ensure your onboarding process for new resellers is streamlined.
For suppliers that already have been dropshipping but are looking to scale your operations, you need to first figure out what are the obstacles that are inhibiting your growth. It could be something as simple as needing more resellers in your network to sell your products or more quality resellers to move a larger quantity of products. Another reason could be your reseller onboarding process. We have seen the onboarding process for just one reseller be a time-consuming process for some suppliers. This could have to do with setting up internal accounts, formatting files, automating data, setting up FTPs or API access, providing content, ordering setup, etc. If there is no system in place to help set up these resellers, you are already losing money from setup labor costs or from resellers backing out from the tedious process.
The Four Stages of the Dropship Supplier
The sole purpose of this blog is to show you the evolution of the modern-day dropship supplier. We will take you through four stages of the dropship supplier and help you identify where you are at in the process as well as steps you can take to progress into serious revenue-driving business with dropship retailers. You may be brand new to dropshipping, somewhat experience or even dropshipping for a long time, but if you are at any of these staging of being a dropship supplier, there is always room for improvement.
1. Beginner
Brand New to Dropshipping
- No dropshipping experience
- Only doing B2B wholesale orders or direct to consumer sales, or both
- Traditional wholesale distributor or brand
- Looking to find new outlets to move more product
How to Improve:
- Get added to online supplier directories
- Get on dropship website applications
- Make sure you can provide your independent resellers access to your product data
- Have a system in place to have reseller sign-up and ordering an easy/automated process
- Make sure you can dropship your products
2. Novice
Customers:
- Dropshipping for a few independent retailers
- Dropshipping from retailer marketplaces/apps like Spocket, Modalyst, Doba, etc.
- Maybe dropshipping for big box retailers such as Staples, Home Depot, Nordstrom, etc.
- Around 0 to 15 retailers dropshipping your products
Orders:
- Dropshipping order volume is anywhere from $0 – $10,000 in monthly revenue
- 1 -15% of your company’s revenue comes from dropship fulfillment, but the majority of the company is mainly wholesale and/or direct to consumer sales
Operations:
- Reseller accounts manually kept on spreadsheets or accounting system
- The majority, if not all, orders are fulfilled manually
- Manage product data, inventory, orders and shipment tracking manually via spreadsheet uploads, emailing, vendor portal logins, etc.
- Manual invoicing
How to Improve:
- Get added to more supplier directories
- Make sure you can provide your independent dealers access to your product data. Preferably the best content that you can provide, i.e. good titles, descriptions, images, etc.
- Evaluate a system to have dealer sign up and ordering automated
- Have a Dealer portal for your dealers to manage their account with you
- Start advertising via social and other outlets for gaining more retailers looking to sell online
3. Intermediate
Customers:
- Dropshipping for a handful independent retailers
- Dropshipping from retailer marketplaces/apps and/or Big Box retailers.
- Around 15-100 companies and retailers dropshipping your products
Orders:
- Dropshipping order volume is anywhere from $10,000-$75,000 in monthly revenue
- 15-30% of your company’s revenue comes from dropship fulfillment, but the majority of the company is mainly wholesale and/or direct to consumer sales
Operations:
- Dealer accounts manually kept on spreadsheets or accounting system
- Some orders are managed manually and some are automated. Could be all done through a shopping cart website hooked up to OMS platforms. Other orders are still processed manually.
- Still handling product data and inventory/pricing updates manually. Maybe some type of automation like an automated email sent to all your suppliers or utilizing a 3rd party system.
- Manual invoicing
How to Improve:
- Start consolidating everything that has to do with your dropship operations into 1 easy to use system.
- Look to get added into the Big Box retailers online sites and B&M stores
- Do a Partner push. Start partnering with not just supplier directories, but also with dropship software companies.
- Fully automate your dealer sign up, providing data feeds, way for dealers to automate their orders to you but also have the manual side for the smaller retailers (that still doesn’t hinder you from your own automated process)
- Have a Dealer portal for your dealers to manage their account with you
4. Advanced
Customers:
- Dropshipping for a large amount independent retailers
- Could be dropshipping from retailer marketplaces/apps and/or Big Box retailers.
- 100+ companies and retailers dropshipping your products
Orders:
- Dropshipping order volume is $75,000+ in monthly revenue
- 30%+ of your company’s revenue comes from dropship fulfillment
Operations:
- Dealer sign up is automated with little manual intervention
- Some orders might be managed manually but most are automated via internal systems and integrations.
- Product data and inventory/price updates are provided in a variety of automated ways for the retailers.
- Invoicing workflows are automated as well
How to Improve:
- Start consolidating everything that has to do with your dropship operations into 1 easy to use system (if you haven’t already done so).
- Do a partner push. Start partnering with not just supplier directories, but also with dropship software companies.
- If utilizing Big Box retailers for dropshipping, have an EDI team to help integrate to their systems (can be outsourced EDI team)
- Not only have a login/portal for your resellers, but also have a Vendor portal for your small brands that what to sell through your network, and making sure this is automated as possible through on system
Final Thoughts
Dropshipping is a fulfillment model, not a business model. Certain companies can be incredibly successful with their business when their only fulfillment model is dropshipping.However, we are beginning to see a big change, especially with brands and manufacturers investing more time and effort into dropshipping due to the high demand for this type of fulfillment model for retailers.
Dropshipping can be viewed as only “elementary” due to the increasing demand of new/small ecommerce sellers; but, it’s worth noting that multi-million dollar companies selling online via their websites and marketplaces also use dropship fulfillment as another avenue for sales by either adding more products to sell or optimizing their supplier chain choices for fulfillment.
By being immersed in the ecommerce and dropshipping space for over 15 years, we are seeing more of a shift to a “mixed-model” approach for both the direct-to-consumer resellers and the brands/manufacturers/distributors. Adding dropshipping into your operations only sets you up for an untapped avenue of added revenue for the company.
But, the main point of being successful with dropshipping doesn’t necessarily all rely on gaining more resellers (which is obviously important), but also automating the process. Most operations that are currently dropshipping are doing everything manually, which can cost time and labor. Automating the different processes, such as reseller sign up, supplying quick/easy access to product data and automating the order fulfillment process will only set you up for success.
Three Main Takeaways:
- Software & Automation: Have the foundation/software in place to help run and automate your dropship workflows and operations. Specifically, reseller signup/checkout, product data feeds, ordering processes, invoicing and payment capturing. This is preferably a system that can automate most, if not all, of these operations.
- Gain Exposure: Go get added to online supplier directories and attend trade shows to get your name out there as a dropship/wholesale supplier, brand or distributor.
- White-Label/Fulfillment: You need to make sure that your fulfillment warehouse can handle shipping individual packets with individual products (non-bulk/pallet orders). Dropshipping is usually expected to be “blind dropshipping”, which means you as the supplier prints and ships products with blank/white labels with none of your logos on the packaging.