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Trying out new products while minimizing risk
“Not in inventory” doesn’t necessarily mean “not available” anymore. With improved technology, the drop-ship model allows online retailers to test the performance of new categories before they commit them to inventory, says CommerceHub.
A pure drop-ship model was the vision for powering many early online virtual stores, but integrating orders with suppliers on the back end while meeting customer expectations on the front end often proved problematic. But with improved technology, drop-shipping is proving itself, among other ways, as a way to test new product and new product categories before making a commitment to carry those items in inventory, according to Frank Poore, president and CEO of CommerceHub.
“All the retailers I talk to have categories they would like to be in but for one reason or another, they aren’t,” says Poore. “If it’s the home category, for instance, they say they can’t stock couches because furniture is cumbersome and heavy. Everyone is looking to reduce warehouse space.”
Poore notes that the ability to connect reliably with suppliers on the back end and gain complete visibility into how they fulfill orders on the retailer’s behalf solves that problem, allowing retailers to try out new product categories. “If they decide they want to sell Bissell vacuum cleaners, for example, they can connect directly to Bissell to try it out. If they start to really kill in that category, they can they can bring it in-house when they know they can move the product, and maybe get a little bit better of a buy. It’s an inexpensive way to test out new categories of products,” Poore says.