How Shipping Has Changed for Brands

I was just chatting with Head of Sales at a major brand recently.

In simpler times, dropshipping for the retailer was:

1. Assortment expansion, and

2. Experimentation - what new SKUs vendors should we be talking to?

In simpler times, dropshipping for the traditional brand was about:

1. In-between wholesale order replenishment, and

2. Experimentation - What new channels are out there for us to work with?

The game has flipped. Now for retailers, it's about:

• Holding no inventory while still reaping all the benefits.

For brands?

• Left holding all the costs without the big orders they used to get. So many brands are not ready for this shift. It starts with supply chain.

• Can't ship orders well - still treat each dropship shipment as a "RUSH" order in their ERP.

• Salespeople at the brand are stuck handling per-each D2C customer shipment complaints - instead of on case-packs or pallets. Not a cost-effective plan.

• Pick / pack costs too high. If your warehouse grew up B2B, there is no actual way to make dropship as efficient as it could be within that facility. Your costs will be double a D2C brand, at least.

• Turnaround times are too high. Orders in by 3pm, ship same day? What planet are you on?

• Returns. Getting any returns at all is a major emergency for most brands. End of statement. ;-)

What's the path forward out of this mess?

Kathy Aronson shared some insights:

Brands should prioritize their drop ship capabilities. Gone are the days of missing your drop ship metrics. Despite warehouse growth by the big guys like Amazon and WM, unless you do huge volume with them, those retailers likely won’t send you big purchase orders for a new item. If a brand wants to build and grow, they must consider 2-3 drop ship facilities (1p, 2p or 3p) across the country that are designed to ship one item at a time and fast! This will enable them to ship quickly to most US locations. Inventory management is the key here. Having the right quantity by warehouse location is critical, yet many brands struggle with out-of-stocks with just one drop ship location. So, start with one drop ship location in the East or South with the plan to react quickly and expand. Focus on staying in stock and speed of shipping.

Suresh Chaganti added:

The whole challenge from the brands perspective can be described as “ are we ready to ship direct to consumers” . Brands are desperate and in many cases do not have the bargaining power to say no. Or they want to be accommodative in anticipation of bulk orders. Whatever the case, when brands start shipping D2C, the impact is felt through out warehouse, inventory, shipping, fulfillment, customer service and returns. Unfortunately the warehouse operations is typically the last one to know of the promises made by sales account management team.

Agree with this assessment. 100% the warehouse is always the last to know!

Taha Z wowed me with a new term I hadn’t heard before - “digital diplomacy” - which I had her explain a bit further here:

Supply chain shift from pallet to product is not a task to be dismissed too quickly. Even if executed correctly, existing retail partners fear the inevitable DTC shifts from brands. And brands fear the platform shifts by retail. İ think the path forward requires digital diplomacy and ecosystem development.

[Digital diplomacy is] a term I coined at ChannelAdvisor when developing DTC for a Consumer Electronics brand. While the brand drove itself on 3P we counter balanced with directing cart links to retailers based on price and availability. Retailer is not cheesed off with aggressive DTC efforts and the brand gets better lead value data to support closer relationship with retailer…

Essentially the diplomacy is to start with the existing ecosystem and work in a step-change approach to the inevitabilities of DTC. If consumers are increasingly on your brand sites, find ways to redirect with cart links to whichever channel is appropriate. Yes there is an e-comm acceleration, and now the realization is stark, don't panic, many of us have been shouting about it for years :) Let's break it down and start with an MVP be that key retail, 3P, or a small-set of bundles you launch so that the supply chain can evolve and transform not disrupt and rarely get to devour. Grow the size of the pie for everyone, develop multiple ecosystems around you. Platforms have eaten all the pipelines :)

One answer to what will get us out of this mess, other than some diplomacy and some careful consideration in all directions, is agility.