Accessing supplier inventory to fulfill e-commerce orders, known as dropshipping, was a popular method for retailers pre-pandemic, but it could now have significant impact on those affected by COVID-19.
Retailers looking to test new products, suppliers with excess inventory and the recently unemployed could all benefit from dropshipping, if used strategically.
The current environment has caused consumers to prioritize different purchases and adjust their spending habits. Retailers who are able to pivot in real time and offer the products that their customers want — and need — are more likely to capture sales. And while this could require a financial risk that companies can’t afford right now, experts say it doesn’t have to.
“Dropshipping is a really easy way to swap out your inventory for products that will sell in the moment,” said Jill Sherman, co-founder and CEO of dropshipping platform Modalyst. “You don’t have to worry about having the upfront costs of inventory. Whichever ones sell well, you can buy in bulk for your store and have higher margins.”
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This is also critical in helping an e-commerce business compete with larger retailers like Walmart, eBay and Amazon. By offering a curated mix of goods tailored to the consumer, companies can build that relationship and foster customer loyalty. In fact, Sherman has noticed a growth in niche stores on the platform.
For people who are recently unemployed and looking for a new revenue stream, setting up an e-commerce store and utilizing dropshipping could provide a low-cost entry point into retail. While building the assortment and creating a marketing strategy to attract customers still requires substantial effort, the financial risk is low.
“It can be a very valuable revenue stream without much capital,” said Sherman. “All you have to pay for is the e-commerce platform and a partner like us. Other than that, you only pay for products after they’ve already been purchased, so you manage your margins.”
One challenge presented by the recent closure of retail stores has been the issue of inventory — specifically, many vendors and retailers have product that they can’t move in the usual way. Through dropshipping, vendors who have lost purchasing orders can still sell and shift product through new e-commerce partners on the platform. Retailers with closed locations can leverage these “dark stores” as distribution centers, both for their own customers and other retail partners.
Sherman has also observed the opposite shift: Many suppliers on their platform are functioning as retailers, too. This could be to access inventory that they never received due to supply chain disruption, or to find new complementary products to the items they already have in their inventory. This lets the shopper find everything in one virtual storefront and place a single order, increasing efficiency for the consumer.