The forecast for the overall increase in 2013 retail sales during the holidays is a lackluster 2.4% according to the Wall Street Journal. However, a bright spot is online sales which the National Retail Federation expects to grow by 9 to 12% this year. This continues the trend of double digit increases for the past 3 years of slightly over 15% per year.
A substantial development is consistently more consumers are avoiding the craziness of Black Friday and the holiday season by shopping online instead. They find they have more options, better prices and a complete absence of the craziness associated with holiday crowds. Cyber Monday is starting to rival Black Friday in popularity.
Online Sales Increase Drop Shipping
Many internet retailers, and the internet component of brick and mortar retailers, rely on their suppliers to drop ship product. The retailer does not keep the items in inventory and instead has the supplier drop ship directly to the consumer.
Customers get a great deal out of this. The retailer is able to offer a wider selection of products. The drop shipping arrangement can mean that they pay lower prices and, quite often, the goods get shipped to their home more quickly than they would have otherwise.
How Drop Shipping Works
In a drop-shipping EDI transaction, the purchase works normally from the consumer end. They put their items in an electronic shopping cart, make the purchase and that information is sent along to the retailer. The retailer, however, takes one more step, if they happen to be a drop shipping establishment.
The B2B end of this transaction—what transpires between retailer and supplier—takes place using EDI documents. Information about the purchase, along with the shipping instructions, is sent along to the supplier, who then fulfills the order on behalf of the retailer.
The supplier confirms the order, packs the order with a branded packing slip specified by the retailer, ships the product straight to the consumer, and informs the retailer the shipment has been completed.
There are benefits all around in this arrangement. The retailer and the seller both share the risk associated with the item, but the buyer never actually has to and keep it in stock in their warehouse. They’re able to bypass having to pay to keep it in storage and the risk of having it remain on the warehouse shelves if it proves to be an unpopular item. Consequently the retailer can offer a broader range of products and quickly test market new products.
The supplier does not have to compete with other suppliers for the limited space available in brick and mortar retail establishments. The seller doesn’t have to spend as heavily on marketing. This increases their profit margins.
With a good EDI solution, drop ship transactions are fast and efficient for consumers, retailers and suppliers. Read more about drop shipping in my four part series.Drop Ship EDI Transactions Increase During the Holidays by Steve Brewer