Offering merchandise from drop ship vendors has greatly extended the assortment of many e-commerce and omnichannel brands. Many e-commerce businesses do not have internal fulfillment and drop ship 100% of their assortment. The challenge for the retailer is to maintain high customer service standards and vendor compliance with the drop ship partner.

Two Mystery Shopping Experiences

Recently, we mystery-shopped two of America’s largest merchants, each of which have tens of thousands of SKUs. This experience illustrates key customer service criteria you should assess in your business.

Company A - mega retailer with catalogs, e-commerce and dozens of stores

Contact Center Order: We were advised that the merchandise was in stock and would arrive in 2 to 5 business days. The order weighed 24 lbs. and arrived in good condition in 4 days. Free shipping was available for customers using the merchant’s branded VISA card.

Returns: Refunds are available for 12 months if the customer is not 100% satisfied; longer if the product is defective. Returns are sent back to the merchant, not the drop shipper (which is a good practice if the merchandise is defective). The downside of this protocol is having product that may need to be consolidated and sent back to the drop shipper, or having small quantities of saleable product in your DC. One solution is liquidation at a store or outlet center.

Returns shipping is a flat rate $6.50 if using the convenience label provided in the customer order. Returns are FREE for customers using the retailer’s branded VISA card. In our case, the flat rate return shipping fee of $6.50 would be a huge savings for us if we wanted to send back the 24 lb. order. The process is easy for the customer -- the order can be returned to a UPS drop box, UPS store, UPS driver, or one of the merchant’s stores. The UPS tracking number was printed on the order and on the peel-off label. The return label allows quick sort on dock and online access to retrieve the order history and post the returned item.

Packaging: On the outside of the carton, in a clear envelope, was the price tag with the merchant’s name, SKU number, item description and color and the retail price! The order was sealed in another clear envelope and did not have the price printed on it. We have shopped this merchant many times and never had this happen before.

Company B - Mega e-commerce company

Website order placement: The company’s website boasts great product at great prices. We ordered two “specials of the day,” three products in all with total retail of $33.00 plus $8.50 for shipping.

The company has a full function, very easy to use, mobile app for ordering, FAQs and tracking your packages. The company has a branded credit card.

During checkout, the website said that the products would be coming from two different manufacturers. The website states that the products are ordered and sent to the merchant’s DC and on to the customer. This process would take 8 to 12 days. Five days after the order placement, we received a shipping confirmation that the first carton had shipped domestically via UPS.

On the sixth day after ordering, we received an email confirming shipment of the second carton. The merchant’s email said, “This shipment is a little different from our typical order” and said it would come internationally direct from the vendor via UPS, but did not include an arrival date. This product had a retail value of $15.00, and the two products arrived 14 days after ordering.

Returns: The returns section on the company’s website is extensive. On the product page, it states whether an item is “eligible to be return” (sic). In some product categories, like swimwear, intimate apparel and food, this return language makes sense. Other product categories don’t – they call out heavy and bulky items and electronics. Why carry these? Electronics is often a high return category. To return an item you have to ask for a return request to be approved within 30 days. Prepaid shipping labels are sent and you must return the product within 10 days of receipt. You will be credited for the return less $8.95 which covers up to five items. The company spells out that the charge covers S&H, labor, materials and restocking fees.

Order consolidation or drop shipping?: This is a big e-commerce, consumer business. However, in a world of instant gratification and same day shipping, is consolidation of products rather than drop shipping a good business practice? The returns process is restrictive and makes us wary of ordering any products they don’t want returned. Does this lower average order -- with only three items -- make money with this many steps; a drop ship handling charge absorbed by the retailer and an international shipment?

How to Assess Your Drop Ship Vendor’s Customer Service

While these are only two shopping experiences, they give us two widely different approaches, which are helpful in evaluating your company’s drop ship operations. Here are some key factors to consider:

What level of customer service are you delivering? Drop shipping puts the vendor in charge of your customer service. The more vendors you are using, the more points of control you need to maintain to keep service up. Shop your vendors. What mystery shopping are you doing to periodically monitor your drop ship vendors?
Stock availability. Are you guaranteed stock and shipping timeframes? Or, are you shipping from a common stock for all merchants using the drop shipper? Are there unknown stock outages?
Shipment arrival date. Does your website and customer service give the customer a realistic arrival date since it’s being shipped from a drop shipper? Or is the date communicated after shipping?
Drop ship compliance. What standards do your vendor compliance manuals communicate? They should include order cycle time; shipping carrier; placement of labels and order documents; tensile strength of cartons; outer carton labeling, etc.
Drop ship process. Does the process need to be streamlined? What are your internal and drop ship costs? Regarding multiple drop ship items on one customer order, are you losing money?
Drop ship system. Have you invested in a system that will allow transmission of customer orders to the vendors; track when they print and confirm ship the orders to the customers; transmit ship confirmations back to your customer service files; generate management reports that help with vendor compliance; give you data to determine S&H costs and service levels? For volume drop shipping, these types of systems are essential.
Returns process. How easy is your returns process? Does it inhibit sales?

Merchandise from drop ship vendors can greatly extend your merchandise assortment. The key is to maintain the same high standards for drop shipping as internal fulfillment.