Dropshipping: a strategic model for next generation ecommerce companies
By combining low startup costs and high margins, dropshipping is becoming a key strategy for high-end ecommerce stores. Whether it’s to jumpstart a business, streamline sales, or expand product selection, dropshipping is an effective way for retailers of all sizes and verticals to gain a competitive edge and build revenue. But, a large misunderstanding regarding what a dropship model can offer still remains. Who stands to benefit the most from a dropship program?
Digital and new
Dropshipping is the most logical model for new ecommerce stores. They can enjoy the low-overhead nature of dropshipping and pursue opportunities to expand their product line as they grow.
Launching a new ecommerce store in today’s crowded market is risky. Dropshipping, however, lowers this risk significantly because it eliminates upfront costs that would be spent on inventory, warehousing, a physical storage space. Since the new retailer would not actually purchase any inventory, there is no danger in being left with items that won’t sell. For example, Blinds.com, a company that has triumphed in the online home decoration industry, relies exclusively on dropshipping. The e-commerce retailer was able to build its brand in a fairly contested market entirely online, while being able to offer a variety of products.
Expanding and experimenting – The extended aisle
Dropshipping also slots in nicely to existing brick and mortar stores looking to expand their product selections and categories. Dropshipping requires zero inventory management. Therefore merchandising options, such as taking on new product lines, are practically unlimited. On top of this, overhead costs are almost nonexistent compared to if they use a traditional marketplace or ship-from-store model. This leaves brick and mortar stores to experiment with an assortment of products, test new verticals and curate their own dropship product mix.
Traditional retailer clothing store, J.Crew, recently launched its ‘Brands We Love’ category on their ecommerce site. This is a perfect example of a retailer that uses successfully a dropship model to explore new brands and products. Dropshipping has opened the door to collaboration with other stores that match J.Crew customer base and amplify the brand.
Additional revenue routes
Dropshipping is a great option for retailers looking for a new revenue model. For example, retailers who run on a subscription model but want to explore alternative methods of building revenue would find dropshipping particularly valuable.
Gwynnie Bee, is a retail service that offers unlimited styles for women. Based on a subscription service, the company sends a box of curated collections to subscribers every month. Customers, therefore, receive the latest trends delivered to their door which they can enjoy and return. The subscription-based ecommerce market has grown by more than 100% a year over the past five years. However, many retailers who offer customers these kinds of subscription packages, such as Gwynnie Bee, also want to be able to explore other means of selling their products.
By integrating with Revcascade’s dropship platform, Gwynnie Bee was able to launch its own marketplace which now allows its subscribers and site visitors to purchase dropship items in addition to the subscription model. Applying a dropship model has therefore brought in a new stream of revenue with little risk while allowing Gwynnie Bee to continue to grow its subscription ecommerce business.