Are more flexible partner models the key to increasing e-commerce profitability?
It’s a challenging time for retail. On the one hand, e-commerce sales have exploded. But also consumer expectations and other pressures that squeeze profit margins.
Despite the e-commerce profitability issues, many retailers still manage to innovate — and get great results. Leading e-commerce solution provider, CommerceHub, recently watched a leading retailer increase gross merchandise value (GMV) run rate by more than 200% in just 90 days. Another grew their business by 100% in 12 months after finding a way to launch new products and brands with less friction.
How did you do that? By unifying marketplace, direct mail and other partner models into one seamless strategy.
Focusing on the marketplace or dropshipping is no longer enough
In an attempt to expand product range and keep pace with evolving consumer demands, many retailers are beginning to introduce additional partnership models for unowned inventory. Some implement curated marketplaces for commission-based selling. Others create e-concessions for top brands or enable self-service models for third-parties—while continuing to nurture revenue-boosting drop-ship partnerships.
While each of these options and more can play an important role in the economics of heightened expectations, problems arise when they are managed across disparate systems. If that’s the case, each new program may require its own connections, systems, and processes that can take months or years to implement. Not only does this slow down your ability to offer customers a greater variety of products online, but it also creates friction with brands. The more systems and integrations brands need to manage, the more difficult it becomes to support them in expanding the breadth and depth of assortment in different partnership models.
What does a retailer have to do? Adapt a more flexible approach.
What does it take to increase profitability?
Even as retailers continue to be pressured by price-weary consumers and supply chain costs, there is a path to resilience.
To drive profitable growth in 2023 and beyond, retailers need to break away from either/or thinking. Many still see drop ship, marketplace, e-concession, and other partner models as separate strategies despite being crucial pieces of the same profitability puzzle. These mental barriers stand in the way of innovation because they bind each supplier relationship to a view of what it currently is, not what it can be.
Instead, it’s time to start thinking about new ways to bring these disparate approaches together into a single, flexible model—one that allows you to expand your product range while maximizing profitability.
Rather than relying on vendors to define how retailers should work with brands, retailers should experiment and adopt new partnership models for unowned inventory based on their business needs. What does it take to offer an exceptional customer experience for every product and every brand? How can you quickly test new categories? How can you make all this profitable?
Thanks to advances in e-commerce solutions, these questions and others like them are easier than ever to answer. The broader your trading network and the more flexible and consistent your approach, the better placed you are to profitably meet consumer needs. By switching to an “any partnership solution” you can:
● Reduce friction for brands to work with you. With the right technology, brands can participate in multiple partnership models without having to wait for new integrations.
● Unleash opportunities for innovation. Once you have a single connection, you can easily launch new inventory models without ownership and scale as needed. This gives retailers the ability to make quick and fluid decisions based on what is happening in the market at the moment.
● Leverage consumer demand. By replacing separate processes with a comprehensive solution, you can easily adapt the way you work with brands as your needs change.
● Reduce your total cost of ownership. Instead of implementing, managing, and maintaining separate systems, your team can essentially flip a switch when it’s time to launch a new model. That means less operational expenses and lower IT costs for you and more choices for your customers.
And that’s all just for starters. Managing multiple partnership models for non-owned assets in a single solution is key to unlocking all types of profit potential. You can leverage different partnership models to meet different needs, and then toggle them on and off as needed. By shifting the focus to speed and scale, retailers will find that they can not only survive the current landscape, but thrive in it.