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Challenges for the wholesale distribution sector when operating a drop ship offering

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With the capabilities of online sales solutions improving all the time and business buyers following the lead of their consumer counterparts when it comes to embracing eCommerce, moving on to this platform is a highly attractive option for many wholesale and distribution companies.

But often, many traditional wholesale distributors will be wary of setting up their own B2B eCommerce site and moving into a crowded market, while eCommerce vendors may not want to go to the expense of setting up their own warehousing and distribution networks. Therefore, one solution that is increasingly being seen is partnerships that use a ‘drop ship’ business model.

Finding a drop shipping vendor allows the wholesale distribution partner to handle stock-related activities, while the eCommerce vendor deals with the online sales, and related marketing and customer service. But while this can allow wholesale distributors to take advantage of eCommerce and cuts out many of the related expenses, it does present several unique challenges that must be addressed in order to make this a success.

For example, if you’re relying on sales by a third-party vendor, how do you make sure that your inventory levels are accurate? This can be vital because if your eCommerce partner is promising customers goods that are out of stock, and you cannot ensure orders will be fulfilled in a timely manner, this will reflect poorly on you and them, and may well see buyers turn elsewhere.

Related to this is the question of ensuring the pricing information you are providing is accurate. This is something a business may not have direct control over due to fluctuations in their suppliers’ costs, but it’s vital the right prices are communicated to your eCommerce vendor and your customers in good time.

There’s also the question of branding – particularly important if firms are doing a lot of their business via multiple third-party platforms such as eBay. Trying to manage several eCommerce stores at once can in itself be a headache, but maintaining a consistent appearance through all your messaging and orders can be difficult. And if your customers don’t know who you are, how will they find you again? This is where you, as the wholesale distributor and supplier of goods, can help your drop-ship partners by branding their sales and deliveries appropriately.

Fortunately, there are solutions to these issues. Please see our related article “How can NetSuite help with operating a ‘drop ship’ business model?” where we explain how NetSuite can be used to help with the challenges associated with stock levels, pricing, and branding of multiple sites.

Alternatively, please don’t hesitate to get in touch with one of our team of experts.

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