Shoppers love having an assortment of options.
Whether they’re looking for something specific, comparison shopping for a deal, or simply browsing, shoppers prefer variety. Aside from allowing shoppers to try something new or take the leap in trying a new brand, large inventories offer a sense of freedom, according to Explorer Research.
But how do retailers manage those expectations when there’s limited warehousing space to consider or they want to introduce a new brand but aren’t sure how it will move?
Through a virtual inventory.
What is virtual inventory?
Retailers have long been used to having physical inventory on hand, but with changing customer demands and a growing assortment of new DTC brands, keeping up has been a challenge.
Usually, replenishment looks a little like this: products are shipped from a brand warehouse to the store location, then held in the backroom before making their way to the sales floor.
Depending on the size of the retailer, this impacts the assortment and volume of an inventory and, in some cases, means that if a product doesn’t sell as well (or flies off the shelf), then retailers are stuck with stock taking up valuable real estate or running the risk of disappointing shoppers with out-of-stock items and shortages.
A virtual inventory is a digital collection of all of a retailer’s available inventory for products it carries. Virtual inventories can include SKUs held by a retailer in their brick-and-mortar stores, warehouses and distribution centers, and it can also include SKUs held by brands a retailer partners with but might not necessarily stock in-house.
A virtual inventory opens up options for retailers in a way that traditional inventory hasn’t been able – by making products available regardless of a location. Aside from building customer loyalty, building a virtual inventory helps retailers of all sizes remain competitive.
Having a virtual inventory also opens retailers up to offering consumers various delivery options. From buy online and pick up in-store (BOPIS) or reserve online, pick up in-store (ROPIS) to same-day delivery, and overnight shipping, retailers have the ability to fulfill consumer needs without expanding the physical retail space.
Key benefits of virtual inventory for retailers
Consumer demand is constantly changing. Whether it’s related to stocking up on certain products to weather ongoing supply chain issues or there’s a new item catching major attention on social media, retailers have experienced a number of challenges in recent years to keep up with that demand.
Developing a strategy that includes a virtual inventory is one of the most powerful solutions for retailers today. Going beyond the physical limitations of a retail store or warehouse and increasing product or brand offerings is a gamechanger for retailers who want to expand and meet consumer expectations.
Here are a few key benefits of having a virtual inventory:
Allows a larger assortment without additional storage or retail space
With a virtual inventory, retailers are no longer relegated to selling only what can be stored at any given time.
Instead, there’s the opportunity to add even more to the product selection: higher-margin goods, popular or trending products, and new or emerging brands can be added to a retailer’s offering without requiring additional space in storerooms or on shelves.
Ensures that products shoppers want are available
There are a multitude of factors that can affect a retailer’s ability to stock the right products on time: global shipping or supply chain issues, items in high demand, or poor inventory forecasting.
Instead of turning shoppers away, a retailer is able to save the sale and tap into offsite solutions to get products into the hands of shoppers, or delivered to their homes.
Helps prevent retailers from ordering too much or too little
A virtual inventory works to the advantage of retailers by offering more freedom in meeting consumer demand. Retailers often overbuy or underbuy products based on inaccurate forecasts. This makes them susceptible to inventory risks that can affect their margins.
Plus, as there’s no longer the need to spend money acquiring products and finding necessary space in the stock room, retailers can be more flexible when bringing new brands to their stores.
Empowers store associates
Instead of disappointing a customer with an out-of-stock item, store associates can save the sale by offering the customer an appropriate online item available to ship from online.
Virtual inventories also tap into the concept of omnichannel shopping. Whether in-store, on mobile or online, shoppers access products in a way that makes sense for them (building brand loyalty and repeat customers in the process).
Creating a virtual inventory
Incorporating a virtual inventory into an overall strategy will soon mean the difference between growing GMV and becoming stale.
Industry expert Rick Watson his perspective on adding virtual inventory through dropship partnerships with modern retailers: “[the path for retailers] is thoughtful curation by identifying emerging brands that resonate with customers and onboarding them faster than the competition.”
Adding 50 to 250 new brands and thousands of SKUs each year to a retailer's offering is just the start in keeping shoppers interested and returning – but how do retailers keep up with that demand and hold an inventory? They can’t. Instead, retailers need to look for ways to offer more products with less physical inventory.
Traditionally, the time it takes for retailers to connect with vendors and offer shoppers new products takes months. By the time a retailer is able to integrate with outside vendors, the window of demand is closing or doesn’t meet consumer needs.
That’s where a dropship strategy comes into play.
Building a dropship program
Creating a virtual inventory successfully means connecting with technology to speed up the process. Retailers looking to remain competitive will need to consider using a dropship program to expand product offerings and meet shopper demand.
Simply put, a dropship program works like this:
- Shoppers place an order through a retail store or website
- Retailers process the order and send information over to a third-party vendor.
- The brand/vendor receives the order, fulfills the request, and sends it directly to the shopper
- The shopper receives the order.
Moving forward, retailers that wish to keep product offerings fresh and differentiated (without worrying about how to accommodate growing inventories or account for limited infrastructure) will require a dropshipping program.
From helping with sourcing and onboarding to merchandising and operations, a successful dropship program works to increase revenue, prevents under or overselling, and quickly accommodates the ever-changing demands of consumers.
Accelerate your virtual inventory with Convictional
As a retailer, dropship programs align strongly with virtual inventory solutions to give them the ability to provide customers with every SKU they’re looking for.
Through Convictional, retailers have the ability to natively integrate major ecommerce solutions like BigCommerce, WooCommerce, and Shopify, and reduce the onboarding time of new brands from 3-4 months down to 15 hours (seriously).
Virtual inventory lacks value if you can’t onboard brands to your store fast enough. If you don’t have a dropship program already, find out how you can launch one with our comprehensive guide, The Modern Retailer’s Guide to Launching a Dropship Program.
If you want help with your launch and need more robust support with it, contact our sales team and we’ll get you set up in minutes.