E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Drop shipping and web presentation make it possible for a retailer to balloon its product assortment. But brand differentiation and headaches of merchandising thousands of new products trump expansion, retailers told the Catalog Conference Tuesday.
The web expands merchants’ ability to sell much more merchandise than they can through catalogs or in stores. And efficient, web-based drop shipping, in which a manufacturer or distributors fulfills orders on a retailer’s behalf, makes it even easier to offer items and fulfill orders. But retailers need to ask: Just because they can do it, should they, panelists at the Virtual Warehousing and Drop Ship Fulfillment session at the Annual Catalog Conference in Chicago told attendees Tuesday. Speaking during the session subtitled Expand Your Product Assortment Without the Inventory Risk, Jonathan Shapiro, president of cataloger Lillian Vernon Corp., said, “Why not have the ultimate drop ship and sell 4 billion products?” He answered: “We’re cautious with drop ship because we want to differentiate ourselves. If you can walk into a Target or a Macy’s and find the same product at the same price as at Lillian Vernon, Lillian Vernon will lose the sale every time.”
In addition, he added, simply managing all those products at a web site is daunting. “How many of you struggle now on your web site trying to categorize your current offerings?” he asked the audience. The challenge becomes much harder with an exponential increase in products.
Shapiro’s comments echoed those earlier in the day by keynote speaker Patrick Connolly, executive vice president and chief marketing officer of Williams-Sonoma Inc., who said, “Why has Williams-Sonoma been so successful? It’s not what we sell, it’s what we don’t sell. Don’t be tempted to put something in your catalog just because you think it will sell.” He said Williams-Sonoma has been intentional about it’s product offering as a way to differentiate itself from competitors. “It’s very difficult to stay disciplined about it,” he said.
Used judiciously, however, drop shipping can be beneficial, said speakers on the panel, which was moderated by Frank Poore, CEO of Commerce Hub Inc., provider of drop shipping systems. Shapiro noted that it helps Lillian Vernon test products online before making the investment in inventory and in catalog real estate. And Steve Hamlin, vice president of operations for QVC and general manager of QVC.com, said the web and attendant drop shipping services allow QVC to sell many more products associated with its core products online than it can sell on TV.
In addition, he noted, the web makes the entire drop ship process work more smoothly than it did in pre-web days. “The problem with EDI was we had to build one-off connections with each of our suppliers, and then we still had no visibility into each supplier,” Hamlin said.
Both Hamlin and Shapiro urged attendees to make sure that any drop ship program pushed data directly into the merchant’s order management system so customer service reps could answer the inevitable where-is-my-order calls, which often are the same customer calling multiple times because she didn’t receive a satisfactory answer the first time. Because QVC reps have such visibility into drop ship orders that the web provides, where-is-my-order calls have declined from 2.5% of QVC’s call center volume to 1%.