Where Dropshipping Truly Shines

Dropshipping has numerous benefits that make it one of the most flexible commerce solutions. Throughout the 21st century, dropshipping has emerged as the most viable way to effectively expand an organization’s assortment without overextending their own owned inventory strategy. 

However, that’s not the only place this unique solution shines. Dropshipping excels at providing a myriad of different benefits—including reducing capital investments, accelerating site traffic, and improving customer lifetime value—to varying business models and strategies. 

Without it, the world’s largest retailers like Walmart and Costco, and even the largest marketplaces like Amazon, wouldn’t be able to effectively test new products, accelerate their time to market, or even survive supply chain slowdowns. 

The Five Places Dropship Truly Shines

1) Expanding Assortment without Inventory Risk 

By now, all of us at Logicbroker hope customers, potential customers, and casual observers understand that dropshipping’s true intentions are to effectively expand assortment without the burden, risk, and sunk cost associated with retailers carrying inventory themselves. 

First and foremost dropshipping allows retailers to meet market demands, expand into complementary product categories, and expand their customer offerings by leveraging their supplier network to package and ship directly to consumers, or in some cases, directly to other businesses. These packages will have the retailer’s logo and unique branding on them, but to maximize efficiency and cost savings, the packages will ship from the suppliers. 

This benefit is paramount to reducing the ever-rising cost (both in money and manhours) of testing new products and gathering data on product and supplier performance. 

Without dropshipping, if a retailer (let’s call them Sockworld) wanted to test out how new moisture-wicking socks would perform on their website, they’d have to coordinate with their warehouse teams, negotiate with a manufacturer, potentially buy thousands of pairs of socks (all while incurring a hefty financial risk), and then sell them for more than that upfront investment. 

But what if customers don’t buy those socks? Then another wave of lost productivity and costs are sunk into finding ways to offload those socks and (probably) losing thousands of dollars just to free up inventory space. 

With dropshipping, they can instead connect the moisture-wicking sock supplier to their network and have them directly fulfill customer orders. While it does lower the margins the retailer would typically see from seeing from their owned inventory, it avoids the added complications that occur when customers either don’t care about your new socks, have too much inventory around an untested product, or have to deal with any returns associated with your latest in failed sock technology. 

Additionally, dropshipping allows the retailer to gather invaluable data on how those products perform, how the supplier performs in their network, and how customers react to their newest products. 

2) Reducing Working Capital Investments 

Similarly, dropshipping’s ability to help retailers navigate inventory risk also directly leads to cost-saving measures. Instead of moving big, bulky pallets of items around, retailers instead can leverage their supplier network to store their own products and ship directly to the consumer. 

But, this isn’t just about physically large products. Dropshipping truly shines when a retailer is leveraging its capabilities in conjunction with their owned inventory business model. If a retailer is operating efficiently, their dropshipping program would help manage products customers desperately want but don’t often buy, while fast-moving products with relatively short shelf lives would be handled through their owned inventory model. 

For example, let’s say Sockworld has a pair of high-performing moisture-wicking socks that fly off the shelves and a very popular pair of double-thick wool socks ready for those frigid winter months. Instead of keeping the wool socks on hand for the entire year, wasting shelf space in expensive warehouses, Sockworld should instead leverage dropshipping to have the supplier hold onto their product and ship it directly to those who request it and keep the moisture-wicking sock in stock. 

3) Accelerating Site Traffic and Conversion

Once a retailer’s dropshipping program is up and running, it’s time to cash in on the extended benefits dropshipping has to offer. Starting strong, dropshipping is known to drive increased site traffic and conversion rates. This is due to the increased selection of goods most retailers experience in the first few months after launching their new program. 

Intrinsically, once a curated expanded assortment hits a retailer’s shelf (or in this case, a digital shelf), more and more customers will explore their expanded offerings. Going back to our friends over at Sockworld, if they bring on shoes, leggings, running shoes, and more into their online storefront, more customers will begin to explore their offerings and complete their entire journey in one visit. Instead of navigating back to Nike to buy their shoes, they’ve begun exploring the deals and opportunities afforded to them by buying joggers, socks, and shoes all in one click. 

Once the word is out there that Sockworld offers more than just socks, the retailer can explore unique ways to continue to convert customers by offering various shipping models, return policies, and rewards programs that can influence and improve the customer experience. 

4) Supply Chain Resiliency

With dropshipping at the helm of your commerce program, and with the right tech partner helping you navigate through its benefits, a retailer should be able to quickly pivot to secondary and tertiary suppliers in the wake of overselling, exceptional demand, or limited supply. 

If Sockworld runs out of their highest selling sock, and its owned inventory model can’t keep up, having backup suppliers ready to insert their inventory availability at a moment’s notice can help keep inventory challenges behind you.

This renewed ability to keep inventory available and moving, even if it’s from slower shipping suppliers, keeps customers happy and engaged. When word gets out that Sockworld didn’t run out of the hit sock of the season while other retailers did, more and more people will flock there to complete (or start) their shopping journey. 

5) Improving Customer Lifetime Value

Each one of these scenarios leads to this final point. As dropshipping alleviates retailer challenges, your customer’s lifetime value skyrockets. Retailers never want to be in a position where their website loses value over time due to a lack of new products, slow shipping times, or unavailable products. As dropshipping saves you time, expands your assortment, and opens up a wave of new extended offerings, customers will naturally see a greater lifetime value associated with your brand. 

The best example of this isn’t with socks but with appliances. If Sockworld’s sister company, Microwave Center, wants to keep profits high and revenue up, they can’t wait for customers to keep breaking or replacing their microwaves, which only happens a few times a decade at most. 

Instead, Microwave Center can leverage additional products like food covers, microwave-safe bowls, and other kitchen utensils through their dropshipping program to ensure a steady stream of customers regardless of whether their microwave needs replacing. 

This innovative commerce model has revolutionized the way retailers and brands, for that matter, operate. As an indispensable strategy for minimizing risks, maximizing flexibility, and optimizing market responsiveness, dropshipping stands as a pivotal component in the arsenal of modern businesses seeking sustained growth and success.

To learn more about the benefits of dropshipping, and the considerations before taking the plunge, please visit Logicbroker’s YouTube page where we dive into everything retailers and suppliers need to know about dropshipping. Reach out to Logicbroker today to discover the value of having a modern, innovative tech partner at your side for investing in dropshipping.

About Logicbroker

Logicbroker is a premier multi-vendor commerce platform that seamlessly connects trading partners regardless of integration type. Our modern solutions empower retailers and brands to take control of their customer experience by harnessing and analyzing vital first-party data, reducing inventory risk, and curating their expanded assortment. By improving the visibility into our client’s commerce programs, Logicbroker can better position retailers and brands for transformative growth.

As business needs and demand shift, Logicbroker provides the ability to quickly switch suppliers and product fulfillment between 3P to 1P and responsibly find new sources of inventory that uphold your brand integrity and meet your delivery promise. ​We work with mid-market and Enterprise manufacturers and retailers across a number of verticals including Health & Wellness, Home Improvement, Consumer Electronics, Toys & Babies, and Consumer Packaged Goods and service brands such as Samsung, Victoria’s Secret, The Vitamin Shoppe, Walgreens, Ace Hardware, and BBQGuys.