GUEST COMMENT Why retailers must re-think traditional operations this Christmas

It’s four weeks before Christmas. Compounded by high inflation, rising interest rates, and energy hikes, retailers have felt the pinch as consumers tighten their purse strings. In line with lower demands, your business has tactfully made its list, stockists have checked it twice, lowering levels to mitigate risk of wasted products and spend.

Despite this, online Christmas shopping sales are projected to grow by 2.7%. As such, it’s the retailers offering value for money (38%), swift delivery options (44%), and real-time order tracking (38%) that will hold significant sway over consumer shopping habits. In fact, 40% of consumers say they would spend more with businesses that can provide this value. The season of joy is the worst time to underserve customer expectations, and risk plummeting profit margins. Ed Bradley, CEO at Virtualstock, considers how can businesses flex and meet whatever the consumer demands may be?

The tug of war: digital versus traditional
Operating on a traditional retail model, businesses commonly procure goods from wholesalers, selling these directly to consumers . While this approach offers stability for oversight of stock levels and inventory quality, traditional retailers grapple with spend forecasting and managing stock margins ahead of time. The inherent risk lies in incurring high costs for warehousing, potentially leading to wasteful spend if sales predictions fall short, and excess stock becoming difficult to move.

This predicament leaves retailers tethered to an operational model rooted in the pre-internet era, one that places product considerations above customer priorities. Now, the retail industry has been digitally disrupted with a surge in online shopping. This transformation has not only intensified supply chain challenges but ignited fierce competition between retailers that are placing customers at the heart of their business models.

To avoid a year of potential stockouts, supply chain delays, and falling behind the competition, traditional retailers still reliant on legacy back-end infrastructures must adopt a strategic approach. Here, adaptability and a customer-centric focus are not just advantageous but essential for sustained success.

Retails’ reimagining
In the spirit of expanding current offerings and venturing into ecommerce, there is a variety of models for retailers to consider. Typically, the question resides in whether to adopt a marketplace approach or embrace a dropship model. The marketplace approach involves partnering with established online platforms, like Amazon. Here, an array of vendors showcase and sell products directly to consumers. The retailer assumes the role of a facilitator, empowering merchants to showcase their products on the retailer’s website. This capitalises on the platform’s existing infrastructure, expanding the retailer’s offerings while fostering a dynamic marketplace for shoppers.

Alternatively, by embracing a dropshipping model, retailers can extend their product range by selling items they don’t physically own. In this innovative approach, only once a customer has placed the order, does the retailer promptly purchase the product from the supplier – despite the product already being listed on the retailers’ website. The product is then shipped directly from the supplier to the buyer. This streamlined process significantly improves cash flow, whilst enabling retailers to diversify their product offerings and expansion into other categories – without the financial risk of inventory management. It also enhances operational efficiency by eliminating the need for warehousing limits, the associated costs of “pick and pack”, as well as direct shipping responsibilities.

Both marketplace and dropshipping models offer their merits, from broad exposure, increased traffic, diverse product offerings, and reduced inventory costs. But considering the nature of Christmas stockings, why settle for just one present when a hybrid approach can deliver a richer assortment?

The ultimate collaboration
To achieve a more versatile and profitable retail strategy, retailers can leverage a software solution that seamlessly integrates both models, wrapped up in a dropshipping and curated marketplace model. This fusion allows retailers to enjoy the best of both worlds. Firstly, the dropship and curated marketplace model compliments an existing stocked-in range to ensure inventory management becomes more precise, reducing storage costs, and allowing retailers to optimise stock levels exactly in line with consumer demands – so no product ends up significantly marked down or wasted by the time of Boxing Day sales.

Secondly, and most importantly, the customer is placed central to this approach. Enhancing supply chain management is a key enabler for elevating the overall customer experience and resolving supplier stock level visibility issues and order status. This is paramount for ensuring retailers are accurately displaying on their website whether an item is in stock or unavailable, eliminating the risk of selling an item to a customer, and then having to issue refunds. This makes for a more informed customer journey and a smoother transaction experience – which will significantly reduce the ‘where is my order’ calls plaguing customer service teams when customers haven’t received an update on whether their order has been dispatched and when it will arrive. This not only enhances customer satisfaction but also drives increased online sales, revenue streams and market share.

Elevating traditional retail models through the integration of a dropshipping and curated marketplace software is pivotal for unlocking retailers’ full business potential and breaking into the ecommerce sphere with force. By embracing this digital evolution, traditional retailers can reform themselves for the future to ensure lasting growth, amplified return on investment, and secure a lasting place on customers’ ‘Nice List’.

Ed Bradley, CEO at Virtualstock