Maintaining the reliability and consistency of the supply chain is a significant and ever-present business risk, especially for distributors.
As the COVID-19 pandemic has unfolded, this risk has been magnified in several ways, from the availability of inventory, to the protection of personnel in distribution centers, to the logistical challenges of delivery of orders by carriers. The statistics speak for themselves: According to a recent survey of supply chain managers by the Institute of Supply Chain Management, 99% of companies of all sizes have experienced supply chain disruption issues. moderate to severe supply during the pandemic.
Additionally, according to the same study, 75% of companies reported supply chain disruptions to some extent related to coronavirus-related transport restrictions. Drop shipping mitigates this risk. A seller’s ability to offer products that are delivered directly from a supplier to the customer via drop shipping, or to deliver the product directly to a branch office, not only reduces supply chain risk, but also eliminates the danger and potential negative impact on human resources.
Significantly expand the product assortment
One of the most powerful aspects of a customer-centric approach, and at the heart of the economic benefit of direct delivery to a B2B distributor, is the ability to dramatically expand the assortment of salable products. It’s important for B2B sellers to be strategic about how and where to expand assortments.
Distributors should first identify eligible product categories, then find suitable suppliers and manufacturers. Salespeople need to assess the revenue growth opportunities and potential competitive advantage of the category, and the extent to which a broad assortment in these areas can meet key customer needs. It is important for sellers to build and establish strong partnerships with suppliers and manufacturers to get the most out of a drop shipping program.
Suppliers must be prepared to invest in the program and commit to doing so before being added to a B2B drop-shipping network. Fortunately, the universe of skilled and motivated drop-shipping vendors is growing as the shift to digital selling accelerates.
On average, there is a 12% increase in revenue for every 10% increase in unique SKUs offered.
Drop shipping for all channels
Drop shipping can be extended to all B2B sales channels. Sellers can apply the leverage of drop shipping to other types of transactions beyond the ecommerce website. EDI, punch-out and other forms of electronic order entry can be served by a robust drop-shipping network, improving buyer selection at all stages of product research and purchase.
Drop shipping is an exceptionally capital efficient model for B2B businesses. It offers all the competitive and operational advantages of a large assortment without the costs associated with inventory held.
This approach can level the playing field against players who differentiate themselves with a wide range of assortments (e.g. Amazon Business) and gives distributors the opportunity to reallocate capital to other areas.
Drop shipping can eliminate or reduce the need for a large network of distribution centers and large and extensive inventory positions across multiple product categories. With reduced investments in these areas, companies are free to focus on broader strategic goals and deeper investments in digital transformation initiatives, ensuring long-term competitive viability.
A proven competitive advantage
There are no other ways to expand product selection and drive growth with ROI characteristics and time-to-market benefits equivalent to those achievable with a delivery model. direct.
The competitive advantage that results from implementing a drop-shipping program is proven: a larger assortment generates more revenue, prevents existing customers from looking elsewhere to meet their needs (increased portfolio share) and helps acquire new customers when searching for products.
According to Forrester Research, 90% of B2B buyers use online search for at least part of their buying process, and the expanded assortment gives sellers more coverage on search engines. This effectively allows distributors to “stay in the game” and increase their market share.
New entrants to the B2B space, as well as growth-oriented leaders like Grainger, are using this model to generate revenue growth and take business from traditional leaders in many verticals. As B2B buying follows B2C e-commerce into a digital first age, it is critical for distributors to be able to show the availability of a wider assortment of products to maintain and grow their business.
Jay Holan is the Managing Partner and Brian Beck the Founder of Beck Ecommerce, a digital strategy and transformation consulting firm. Brian Beck is also the Founder and Managing Partner of Enceiba, an Amazon B2B-focused agency. This article is excerpted from a Beck Ecommerce white paper, “The Hidden Growth Leverage: B2B Ecommerce and Drop Shipping: How a Proven B2C Tactic Can Generate Massive Growth for B2B Distributors.”