In the retail world, drop shipping is catching fire. As the Wall Street Journal reported earlier this year, retailers are jumping on the drop-shipping bandwagon not only
to offer their customers a wider variety of products and
provide a more satisfying shopping experience, but also
to cut their inventory and supply chain costs by relying
on third-party suppliers to stock, manage and deliver their
As it becomes more mainstream among retailers, drop
shipping presents a golden opportunity for suppliers to
substantially grow their business. But it’s by no means a risk-free opportunity.
For many suppliers, as well as their retailer partners, the
biggest risks of drop shipping occur when customers’ orders
arrive later than promised, arrive at the wrong address — or
worst of all, don’t arrive at all.
According to Richa Gupta at VDC Research, these types
of “last mile” shipping gaffes happen more often than many
suppliers might think. In fact, Gupta says that 30 percent of
all shipments fail to make it to their intended recipient on the
“This translates into increased costs for delivery service
providers and reflects poorly on sellers, resulting in
pronounced consumer dissatisfaction,” Gupta says.
“Last mile” errors — which invariably lead to expensive
re-delivery charges that can easily wipe out suppliers’ profit on
most orders — typically occur for one or more of these reasons:
• Carriers having difficulty finding the destination address
• Congestion and high traffic in urban areas causing a delay
• Incorrect addresses leading the driver to the wrong location
• Signature requirements not being met when no one is at
home to sign for package
Considering that the last mile consumes more than a
fourth ( 28 percent) of total shipping costs and makes up half
(50 percent) of total logistics costs on any shipment, “last
mile” mistakes are huge risks for companies in the drop
The best way for suppliers to mitigate those risks is to find
a strategic transportation management execution partner with
a proven track record of solving the “last mile” challenges of
delivering orders to customers at the right time and place.
Equally important, before launching a drop shipping
program for a retailer, shippers should set up a
comprehensive onboarding process that clearly defines and
covers all aspects of the order-to-delivery workflow. This
will not only ensure that everyone is on the same page
before the program begins but also prevent any unwanted
surprises after it starts.
In addition to creating an onboarding process, the
following are five key practices shippers can implement to
reduce errors that result in costly redelivery charges and an
unsatisfactory customer experience.
No. 1 — Review freight billing procedures with your
retail partner to clearly define who pays for freight
charges and how they will be recovered. In some cases,
for example, when packages are being shipped using the
retailer’s shipping account number, certain surcharges may
be assessed on the suppliers instead of being subtracted from
the retailer’s account.
No. 2 — Build profiles in your shipping software for
automatic routing. You can also ship faster and with greater
accuracy by embedding your retailers’ profiles and routing
requirements into your shipping system. This eliminates the
need for workers to manually select carriers and prevents
incorrect routing decisions.
5 Tips For More Cost-Effective Drop Shipping