SPECIAL FOCUS
DROPSHIPPING
Introducing drop shipping:
How virtual inventories
boost business
E-commerce sites have become a modern version of catalogues across all industries and dropshipping has evolved
as a common denominator. RICHARD JONES, co-founder of CommerceHub, gives us the history and
illuminates some of the benefits
What is drop shipping?
Drop shipping is a supply chain relationship between
retailers and suppliers that allows retailers to sell
large assortments of items online that they do not
independently own, stock or fulfil themselves. Drop
shipping allows the supplier to send any online
purchased items directly to the end customer, and
when executed well, drop shipped items are fulfilled
with the same branding, delivery performance and
customer experience as if they had come from the
retailer’s own warehouse.
This allows the retailer to take no inventory risk
whilst enjoying the increases in demand, driven
by offering a greater product range. The rise of the
Internet and the desire to respond to consumer
demand for more breadth of products has led to wide
adoption in many countries over the past two decades,
and it shows no sign of slowing for the retailer and
supplier alike.
So where did it all begin?
Early days
Before the Internet, wholesale fulfilment was primitive.
It was primarily concerned with bulk fulfilment and
items were shipped in large volumes to a distribution
centre (DC) and then to a store. Direct-to-consumer
fulfilment was non-wholesale, with cataloguers
42 JEWELLERY FOCUS
fulfilling their own inventory in specialised warehouses
that could pick and pack single items – think small
boxes and UPS to your door.
Catalogue-only retailers and premium incentives
vendors built their businesses by becoming a sales
channel for products, helped by other D2C cataloguers.
They took top line revenue and marked up the cost of
the goods, plus delivery and handling. Four to six weeks
delivery was standard, and communication tended to
be on paper or via fax, so consumer expectation was
lower than what we see today. And although SKU
assortments were typically small, volumes could be
very large.
Meanwhile, a class of distributors existed who
specialised in replenishment for small businesses
would buy products in bulk from manufacturers and
pick relatively small shipments for these smaller stores.
When early drop shipping retailers came calling, it was
these distributors who found themselves well prepared
to start shipping individual orders in high volumes
directly to customers in a completely transparent way.
The rise of e-commerce
For all retailers it soon became clear that e-commerce
was the future of retail. Many established retailers
first began to dabble with e-commerce by setting
up experimental teams separate from the main
organisation. These teams would build primitive
ecommerce sites to accept orders and ship out the
products from the corner of a DC.
Later came the pure-play e-commerce retailers
– a new type of retailer who were purely digital,
owning no stores, warehouses, or stock. Their focus
was branding, merchandising, promotion, and
‘‘
For all retailers
it soon became
clear that
e-commerce
was the future
of retail
‘‘
D
ropshipping is relevant for all types of
retailers looking to offer an expanded
assortment and a reliable logistical
infrastructure, but for independent jewellers
expanding online, drop shipping could be the answer
they need to boost their bottom line.
July 2017 | jewelleryfocus.co.uk