The recent GOURMET INSIDER® retail roundtable, which took place at the summer Atlanta International Gift & Home Furnishings Market, served up revealing insights on the inventory management challenge confronting independent kitchenware retailers. Comprehensive coverage of the roundtable begins on page 18; and you can watch a video of the roundtable at gourmetinsider.com.
The retail panel examined topics ranging from the nuances of balancing mix for optimum turn rates to the need for responsive vendor replenishment support, inventory management factors hardly new to the independent retail channel that have been amped up in today’s pressurized competitive arena. The roundtable discussion, at one point, turned to a relatively new inventory management consideration for these retailers: Dropship programs.
Drop-shipping is moving up the list of this channel’s priorities in the face of already tight in-store inventory limitations and mounting concerns about sales lost to the virtually unlimited inventory of digital commerce. The drop-ship opportunity, at its best, has the potential to eliminate certain inventory obstacles while opening new revenue outlets for independent gourmet housewares. It could mitigate out-of-stocks on popular items that can’t always be replenished as needed. It could moderate the up-front investment in higher ticket, space-consuming wares. It could extend on-floor assortments in core classifications and brands. And it could open independent kitchenware retailers to potentially valuable accessory businesses — such as specialty tableware — that often can’t fit productively into a compressed store layout.
Retailers reluctant to adopt drop-ship programs argue, with good cause, that independent store customers often crave immediate purchase gratification to go with exceptional service, and they can become disenfranchised when they can’t carry out what they entered to buy. This fuels a “they might as well buy it on online” rationale.
The counter to such reasoning contends that an effective drop-ship program on select items from vendors well-equipped to handle the logistics, however ideal it is to have stock on hand, might be another way to prevent a sale from going to an e-commerce resource.
Independent retailers wary of inviting vendors directly into their cozy customer relationships can always have the orders shipped to stores for a later pickup. Some customers might feel the service they receive more than justifies another store visit, and that might even generate add-on sales. Or retailers could just have the products shipped to the customers, a more likely convenience preference. Either way, retailers might find their customers are more than willing to wait a couple of days for purchases because of the value placed on the special consideration and extra effort received from the retailer: Hallmarks of the independent channel that don’t have be sacrificed by a drop-ship offer.
Drop-ship programs are worth exploring more seriously as an effective way to overcome inventory limitations in some classifications and to mitigate the fallout from out-of-stocks. Don’t underestimate their potential to contribute to sales in a much bigger way.