Finding the Best Drop Shipping Solution: Quick Guide

FIDELITONE is seeing increasing demand for drop shipping services and solutions, says Pat Diggins, Director, Strategic Accounts, FIDELITONE. “Many consumer companies want to alleviate high inventory levels, so they’re bringing in new selling partners to expand sales,” says Diggins. He says the best drop shipping service is one that brings proven experience, robust IT integration, and versatile customization to the table.

Retailers have stringent requirements

A consumer brand that wants to sell through major retailers, such as Costco, Nordstrom, Target, or Anthropologie® has to meet stringent requirements to support the retailer’s brand identity, customer relationships, and SLAs. For example, says Diggins, your drop-shipped package needs to have the retailer’s packing slip, which requires a custom template for the packing slip—or actually pulling in the retailer’s packing slip from their system. Order communication requires real-time integration with the retailer’s portal for order information. You may be required to use the retailer’s freight account as well. This can insert additional work and extra steps in working with a new carrier.

All of this speaks to intensive configuration and connection of IT systems. This raises the bar for finding a drop shipping service that can meet your own business goals and agreements, explains Diggins.

Clients who drop ship to retailers using FIDELITONE’s order fulfillment services place their selected SKUs in a FIDELITONE warehouse, where products are tracked and managed through the warehouse management system (WMS). “They flow through the warehouse like a regular order,” explains Sonia Medrano, Operations Manager at the FIDELITONE Wauconda, IL warehouse.

Meeting SLAs

And the ability to meet unique SLAs for individual retailers is crucial. Some orders may be required to ship within a few hours; some may be required to go out via next day air, she notes. Whatever the retailer’s SLAs, data connectivity and the WMS must be configured to support them, processes must be in place to follow them, and people need to be trained to execute consistently.

Understand, too, that if you are working with multiple retailers, you will need support in customizing SLAs for each one, sometimes for the same SKUs. FIDELITONE dedicates leadership to each client to ensure they know the client’s business and translate needs into reliable SLAs based on their agreements with retailers.

Drop shipping returns

No order fulfillment solution is complete without a process for managing returns. Service agreements will specify a method for returned merchandise, which could be a return to the retailer’s distribution center or a shipper’s warehouse location. Solutions may be as unique as the retailer.

Most retailers choose to retain RMA control. In some of FIDELITONE’s drop shipping agreements, the retailer collects returns at its distribution center and ships them to the FIDELITONE warehouse on a periodic basis, explains Medrano. In this example, FIDELITONE is prepared to accommodate the influx of inventory efficiently and continue providing full inventory visibility. The process hinges on proper communication with the retailer to understand timing and quantity of return shipments. Warehouse teams need to plan operationally for the influx, understanding dispositions for each SKU.

IT hurdles in drop shipping

“The greatest limiting factor in constructing a drop shipping solution is technology,” says Diggins. “The initial set-up and testing are most important.” Fulfilling the orders requires direct integration with the retailer’s orders system or with an order processing hub, such as CommerceHub, BigCommerce, SPS Commerce, or TrueCommerce. Timely flow of advance shipping notices (ASNs), a component of SLAs, is crucial as well. Failure to maintain communications is a key point of failure for some consumer brands seeking to do drop shipping, notes Medrano; it can result in loss of a business relationship.

“We have experienced IT teams on-site who have integrations built for many major systems ,” she adds. She points out that FIDELITONE’s experience integrating with dozens of systems leads to quick and accurate up-front integration without a heavy investment in customer IT solutions. “We make things easy,” she says.

FIDELITONE clients also have access to a private partner portal, continuously populated with real-time data about inventory, product movement, and order statuses.

Is your drop shipping solution scalable?

Whether your consumer brand is bedding, small appliances, housewares, apparel, or other consumer goods, you’re aiming for volume and revenues. So what happens when you succeed? Not all drop shipping solutions scale well, explains Diggins. Both on the IT side and in warehouse capacity and capabilities, it’s important to find a partner who has the investment—and the warehouse workforce—to get the job done without a hiccup.

As many retailers test out new brand options through ecommerce sales, what happens if your products are selected to enter brick-and-mortar stores as well? A partner with omnichannel service experience should be prepared to expand your model seamlessly with retail distribution and help you avoid costly chargebacks.

In addition, look for a partner who offers warehouse locations nationwide. This allows you to place products in different geographies. You can get products closer to consumers, stores, and distribution enters while also reducing freight expense.

Factors for success

“Historically, we provided drop shipping to clients to shorten the supply chain, getting products into consumers’ hands faster,” observes Diggins. While that’s still a benefit, drop shipping is being used by consumer brands today primarily to expand markets, move excess inventory, and drive sales.

Success in drop shipping requires consideration of technology integration and related costs, ability to meet SLAs, and versatility in scaling with emerging needs. And because of the complexities of drop shipping models, experience counts. We’d love to hear about your drop-shipping needs. Reach out any time to speak with a specialist.