ERPs Can Help Retailers Capitalize on Drop Shipping

August 29, 2018

Posted by John Weber

ERP, e-Commerce, Retail, Drop Shipping

 

A huge number of transactions that still take place in stores will soon shift online. That’s why retailers of every size are developing the quickest, easiest, and (potentially) cheapest ways to move products from suppliers to customers.

One solution is drop shipping, which promises speed and convenience in an on-demand retail model. Most retailers purchase stock in bulk from suppliers, store it, and take responsibility for delivery to customers. Drop shipping shifts those burdens to suppliers by allowing retailers to purchase from suppliers as and when consumers buy products. The suppliers then take care of the delivery, sending orders directly to the consumer.

Drop shipping operates on razor-thin margins, though, and can only be as effective at driving business as retailers are at processing orders. Strong enterprise resource planning (ERP) software can introduce the kind of efficiency and visibility in the sales process that retailers need to make it work.

Here are the ways each kind of business can benefit from the growth of drop shipping and a strong ERP.

Large Retailers

For large retailers, drop shipping instantly removes the limitations on inventory, making every item a supplier has available at any time. Think of it in clothing terms. No longer will customers be unable to get an item of clothing in the right size or color. The risk of anything being out of stock is vastly reduced for retailers, meaning they don’t lose
business because of it.

Small-to-Medium Enterprises (SMEs)

For SMEs, drop shipping offers similar benefits to their larger competitors, creating a major opportunity to grow that otherwise wouldn’t have existed. For the first time, SMEs will be able to boast a similar inventory of products as the more established brands in the sector (providing they have the supplier deals to back this up).

Entrepreneurs

Drop shipping makes it easier than ever to start your own retail business from scratch. Effectively turning retailers into third-party bridges between suppliers and customers means that an individual with a laptop and an internet connection can get their business off the ground with very little capital investment.

The key to unlocking these benefits, no matter the size of a retailer, is an ERP providing complete visibility into the sales process. Having access to a wider range of products on-demand sounds promising, but it isn’t an automatic benefit. The right ERP offers the ability to efficiently and effectively process orders and reap the rewards of drop shipping.

For more on how ERPs can enable retailers to take full advantage of drop shipping, read John Weber’s article in Retail Technology Review.