Drop Shipping: The Path to E-Commerce Growth for CPG Companies

If your well-established Consumer Packaged Goods company is like many legacy brands, e-commerce is in your future - if it’s not part of your strategy already. 

We can thank brick-and-mortar retailers for some of this. Many now require consumer products manufacturers to support e-commerce initiatives by drop shipping online orders to consumers. 

This drop shipping requirement can seem daunting to operations that aren’t set up for direct-to-consumer fulfillment, especially when it needs to begin quickly. Even so, as the face of consumer retailing evolves, this forced entry into e-commerce fulfillment has its advantages:

  • Retailers save money because they aren’t warehousing the merchandise and managing fulfillment.
  • The manufacturer’s carbon footprint is reduced because drop shipping eliminates transportation of goods from the manufacturer to the retailer’s warehouse for order fulfillment.
  • Shoppers often receive their orders more quickly.
  • The brand can explore e-commerce growth potential on a smaller scale.

Manufacturers responding quickly to retailer drop shipping needs often get outside help, at least initially. This strategy offers significant benefits: 

  • It minimizes disruption in the warehouse while allowing companies to respond quickly. 
  • When contracting with experienced professionals, logistics managers learn best practices before bringing the process in-house.
  • Manufacturers can test e-commerce feasibility without making the often-significant changes required internally. 

Drop-Shipping-Drives-Efficiency-and-Experience

E-Commerce Expansion Comes in Many Forms

Drop shipping often leads manufacturers to accept that in order to keep growing, they need a direct-to-consumer sales channel of their own to protect market share and remain relevant.

Their e-commerce expansion can take many forms that include:

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  • A musical instruments manufacturer that provides extensive product information on its e-commerce site, but encourages shoppers to buy the product from a local brick-and-mortar retailer so they have it immediately.
  • An athleticwear brand that uses its online platform to add value through an upsell to product customization and personalization that isn’t offered in brick and mortar stores.
  • The jeans maker that intensified branded e-commerce site marketing and enhanced delivery options after watching in-store sales decline.

Some ease into e-commerce by selling through Amazon. The mega e-tailer’s Fulfillment by Amazon program lets manufacturers avoid establishing their own e-commerce system by shipping merchandise sold on Amazon to one of that company’s warehouses. Amazon handles all order processing and fulfillment. 

This end-to-end out-sourcing simplifies things for the manufacturer, but has a significant disadvantage. In this model, Amazon, not the brand, sets the product price. Consider the potential impact of price-cutting on the brand’s image when reviewing this option. 

Others sell on Amazon, but control pricing and order fulfillment by becoming Amazon Prime-certified through the Seller Fulfilled Prime option. Yet another option that lets brands avoid establishing their own e-commerce platform involves selling on Amazon, but partnering with a Prime-certified third-party logistics provider for fulfillment. 

Options such as these give manufacturers time to gather and analyze data. This helps determine which products to sell from a brand site, how many they can expect to sell, and where to set up fulfillment to meet consumer demands for speedy delivery.  

Can You Go It Alone?

Companies that go to the next level and launch a branded e-commerce platform often partner with experienced enterprise logistics providers on the fulfillment side. This significantly reduces the learning curve as they staff up. It also lets them identify existing fulfillment processes that are ripe for improvement. Drop-Shipping-Supports-Ecommerce-Growth

That was the case when a national brand expanded from brick-and-mortar locations to online sales. When it encountered problems with shipping trends analysis, invoice audits, and payment protocols, its leadership knew that reducing transportation costs and creating a more efficient supply chain had to become a top priority.

The company turned to our experts at Transportation Insight for help. By providing services that included optimizing the company’s logistics operation, providing auditing services, and creating greater shipping data visibility, we helped the brand save an average of $9 million-plus annually

In addition to partnering with outside resources, manufacturers that pursue direct-to-consumer sales do two other things that make a difference. 

  1. They add leaders with relevant expertise to the staff.
  2. They include representatives from all affected areas, from finance to product development to logistics, in all planning.

Adding e-commerce to an established operation requires organization-wide collaboration plus insights, guidance, and advice from experts who are steeped in this growing segment. To help you improve your ability to serve online customers, download our resource guide, Start the Cart: A Manufacturer’s Guide to Achieving E-Commerce Fulfillment Excellence. You’ll discover insights into how e-commerce logistics challenges and solutions are affecting CPG companies.

What’s your biggest e-commerce fulfillment challenge today? Tell us in a comment. 

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