Revenue increased 11.9% in Q1 of 2015, to $17.26 billion compared with $15.42 billion in the year-ago period.
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QVC, for instance, reports that visibility into its drop shippers’ activity has reduced where-is-my-order calls from 2.5% of call center volume to 1%. Hamlin reports that QVC keeps up-to-date status reports using its Commerce Hub link. QVC is automatically notified by vendors when they received orders and then when and how the merchandise was shipped and when it is expected to arrive. Not only do QVC’s customer service reps have access to this information, but customers can also go to QVC.com to check the status of their order using this information.
And while it seems like a small matter, what label the vendor puts on the shipment is also critical to the success of drop shipping. Many vendors want to put their own name, return address and phone number on the box. But many experts say retailers should insist their name and related information, including product code data, be placed on the box instead. Macys.com, for one, is wrestling with how to deliver drop-shipped items in Macy’s gift boxes. Anderson says some drop shippers offer their own decorative holiday boxes, but some customers still want the box with the Macy’s name on it. “Your vendor needs to act as if it were your own warehouse,” Poore says.
Customers who receive shipments with the vendor’s labels may encounter problems if they have questions regarding the purchase or attempt to return the merchandise. Not having the right retailer information on the box is an especially big problem for retailers who allow customers to return merchandise purchased online to a store. If the merchandise does not have the proper retailer-issued coding on the box, the clerk at the store handling the return may have difficulty identifying the item-especially if the store does not carry that merchandise, Poore says. With the proper coding, a clerk should be able to scan the item and know right away that the item was purchased from that store’s online operations and how to handle the return.
Beyond logistics, there is a sound marketing reason for retailers to use their own packaging. “If a customer sees the manufacturer’s name and contact information on the box instead of the retailer’s, they might think that next time they can go directly to the manufacturer and buy it. You don’t want anyone coming between you and your customer,” Poore says.
Once they have the logistics down, many retailers are looking to expand their operations.
Cooking.com, for example, today mostly limits its drop shipment orders to perishable items and bulky products, like large cutting boards. In addition to negotiating with several book publishers to offer 8,000 cookbooks, Cooking.com has wanted to sell large outdoor grills but found the grill manufacturer did not have the capability to drop ship the items to the retailer’s specifications. Now, Cooking.com is talking to other third-party companies that can do that, according to Handlen.
Macys.com currently offers a limited line of perishables and unique gift items through drop shipment, but is looking to expand its product line through drop shipment. “We’re looking at expanding our fashion line, especially with shoes and handbags,” Anderson says. “We’ve identified several manufacturers of shoes and handbags that will drop ship for us. And we’re even looking at drop shipment for some specialty clothing lines like bridesmaid’s dresses.” In addition, Macys.com is considering drop shipping luggage, given the size and shape associated with that product.
“Drop shipping has expanded our product assortments and helped us on our way to being a multi-channel retailer,” says QVC’s Hamlin. QVC, for example, uses drop shipments for all goods offered on QVC.com that are not available as part of the retailer’s television offerings. Except for large items, such as computers, QVC keeps in inventory most of products offered by its television networks because those items are typically sold in large quantities.
But for all its benefits, drop shipments offers challenges that retailers need to be careful of. “The Internet landscape is littered with companies that wanted to eliminate the cost of warehousing, but didn’t know how to handle drop shipping right,” says Poore. l
Lauri Giesen is a Libertyville, Ill.-based freelance business writer.
If you build it, they will come-but do you really want to?
The web expands merchants’ ability to sell much more merchandise than they can through catalogs or in stores. But retailers need to ask: Just because they can do it, should they?
That was a question that came up during a panel discussion at last month’s Annual Catalog Conference in Chicago. And nearly all panelists answered “no.”
Jonathan Shapiro, president of cataloger Lillian Vernon Corp., raised the subject. “Why not have the ultimate drop ship and sell 4 billion products?” he said. He quickly answered his own question: “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 said, the items don’t just somehow appear on the web site and in product databases; someone needs to manage them. “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 the day’s keynote speaker Patrick Connolly, executive vice president and chief marketing officer of Williams-Sonoma Inc. “Why has Williams-Sonoma been so successful? It’s not what we sell, it’s what we don’t sell,” he said. “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. Especially when drop shipping arrangements can make it so easy.