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How to Integrate Dropship and Marketplaces Into a Winning eCommerce Fulfillment Strategy

Blog Post
As they evaluate their eCommerce fulfillment options, many retailers are considering dropship and marketplaces as the most effective solutions for their business.
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By Anthony Hockaday, Director of Omnichannel Services, Radial

Today’s customers expect retailers to deliver a seamless omnichannel experience—to the point where online shopping and having access to different types of fulfillment options have become a regular part of everyday life. Consumers shop online at all hours of the day and expect to be able to choose an eCommerce fulfillment method that best fits their schedule, needs, and circumstances.

In response, retailers are incorporating more eCommerce order fulfillment options than ever, with store fulfillment methods like buy online, pickup in-store (BOPIS); buy online, pickup curbside; buy online, return in-store (BORIS); ship-to-store; and ship-from-store continuing to rise in popularity due to their convenience. Having multiple choices has become essential for a successful omnichannel retail shopping experience. In addition to wanting convenience, customers also want the best price and the fastest order delivery possible. Many will choose a retailer based not on the brand, but on product availability and order fulfillment speed. They will also change brands to find what best suits their immediate desires.

In a post-pandemic world where supply chain disruption, manufacturing delays, and rising transportation costs are still common, retailers must be able to source inventory from multiple suppliers and optimize distribution and shipping to get the product to the customer as fast as possible. It requires complex order orchestration and real-time visibility into inventory, third-party logistics companies, suppliers, and shippers.

As they evaluate their eCommerce fulfillment options, many retailers are considering dropship and marketplaces as the most effective solutions for their business.

The Advantages and Challenges of Dropship Fulfillment

Dropship is an eCommerce order fulfillment process where retailers do not stock inventory themselves. When a customer order comes in, the order is sent to the manufacturer that then ships the order directly to the customer. The retailer lists the products on their eCommerce sites along with their own in-stock inventory, and the customer is not usually aware of the dropshipping arrangement.

The primary benefit of dropship is that retailers do not have the expense of stocking inventory in fulfillment centers, nor the cost or responsibility of order fulfillment and shipping. Dropship enables retailers to test new product categories with a minimal investment.

One of the challenges retailers face with this eCommerce fulfillment method is that they don’t have control over the dropship supply chain, order fulfillment and shipping process, or the customer experience—except by the terms of the contract. Many dropship manufacturers brand their products and shipping under their own company, which can detract from the retailer’s brand experience. It can also be difficult to track dropship inventory unless the retailer is using a distributed order management system that integrates with the manufacturer’s system and provides real-time inventory visibility.

The Advantages and Challenges of Marketplaces

There are two primary models for marketplaces: 1) where a retailer builds their own eCommerce site into a marketplace of sellers, or 2) where they sell their products on marketplace platforms such as Amazon, eBay, Target Plus, Alibaba, Etsy, and many others. While Amazon has made the second approach popular, the first model has many benefits as well.

Adding marketplace sellers to an eCommerce retailer’s website lets retailers expand inventory choices from different sources while still maintaining brand loyalty. Creating an online marketplace can enable retailers to become a “one-stop-shop” where customers know they can find everything they need and so keep returning to the retailer to make repeat purchases. Marketplace sellers are responsible for their own order fulfillment and shipping services (unless contracted through the retailer), reducing overhead costs for retailers while still letting them scale product selection. Multiple marketplace sellers that offer the same or similar products can also help reduce out-of-stocks and keep customers on a retailer’s site.

Unless vetted carefully, marketplace sellers may offer inferior product quality, poor customer service, and a negative customer experience. Retailers need to have strong contract terms and conditions, as well as policies that protect customers from negative marketplace experiences. For example, some offer protection plans that refunds a customer’s money when marketplace sellers fail to deliver or resolve issues. This helps ensure customer satisfaction and loyalty even when they have a bad marketplace experience.

How to Integrate Dropship and Marketplaces Into an eCommerce Fulfillment Strategy

Before retailers can add dropship or marketplaces to their fulfillment strategy and experience the scalability these two options provide, they need to evaluate their technology. To deliver an omnichannel commerce experience, data and systems need to integrate and provide a single lens across the order fulfillment process. Many retailers and manufacturers use legacy systems along with cloud-based systems. A true omnichannel experience is delivered through a connected ecosystem, so a retailer’s order management system (OMS) needs to be able to connect to on-premises and cloud systems and applications.

An integrated system enables retailers to automate workflows, eliminate or reduce manual processes, and deliver a true end-to-end omnichannel experience to customers.

Use a Distributed Order Management System

One of the best ways to create a connected system is to leverage distributed order management to orchestrate, automate, and optimize the supply chain, including order routing, order splitting, shipping, inventory forecasting, restocks, and inventory management. The system is designed to optimize fulfillment while minimizing costs. It determines the best fulfillment method to reach the customer the fastest and at the lowest cost.

Does My OMS Include Distributed Order Management?

This is a great question that retailers need to ask when evaluating OMS providers or selecting a new one. While an OMS manages and tracks the entire order process, distributed order management is an advanced part of that system that focuses on optimizing eCommerce fulfillment from the best location. Leading OMS solutions, like Radial, include distributed order management features that:

  • Support fast, profitable shipping. It dynamically orchestrates complex fulfillment scenarios and ships orders faster from the best, most profitable locations.
  • Deliver personalized experiences. It personalizes every customer engagement touchpoint—from order capture, lookup, and modification to cancels, refunds, and credits.
  • Simplify returns. It makes returns easier with comprehensive reverse logistics solutions including BORIS, eligibility checks, return merchandise authorization ID generation, and return labels.
  • Provide real-time inventory control. It enables retailers to manage available-to-promise (ATP) inventory by channel, minimizes out-of-stocks, and gains full supply chain visibility to track and allocate in-transit inventory. This helps retailers ensure they have accurate inventory levels.
  • Deliver unified, actionable, data. It turns data into insights by providing a single dashboard to see all inbound, outbound, item, order, and customer data in one place.
  • Easily integrate into key systems and applications. Order management solutions with distributed order management provide out-of-the-box API integrations to popular systems and can configure custom integrations where needed.

Retailers that want to add dropship and marketplaces to their eCommerce fulfillment strategy need to start with ensuring they have a modern order management platform in place. Next, they need to select and vet dropship manufacturers and marketplace sellers that align with their brand values and that will support a unified customer experience. Customers should not feel any disconnect in their shopping experience regardless of where the product is sourced or fulfilled in the supply chain. The process of adding dropship and marketplaces should be a quick and streamlined process with the right OMS that leverages distributed order management.

Learn about Radial’s distributed order management approach as part of our industry-leading OMS to optimize eCommerce fulfillment for your retail business, discover how Radial Dropship Manager lets you test new products without the risk and cost of inventory overhead, and find out how our omnichannel technology helps streamline experiences in marketplaces and provides critical insights to help you succeed in any marketplace.