Featured Startup Pitch: DropShip Commerce is on a mission to bring drop shipping to the mainstream

DropShip Commerce logoCompany: DropShip Commerce

Website: www.dropship.com

Headquarters: Greater Salt Lake City, Utah

Year Founded: 2011

Founder: Jeremy Hanks

Investors: Kickstart Seed Fund, Peterson Ventures, David Cohen, 500 Startups

Employees: 17

Twitter: @DropShipcom

Company Description: DropShip Commerce enables retailers and brands to utilize drop shipping to sell more products, in more places, more accurately.

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Jeremy Hanks, DropShip CommerceBy Jeremy Hanks, founder and CEO

Product Overview

DropShip Commerce is the scalable online platform for integrating and managing drop ship partners, product, inventory and order data. By handling the exchange of data through a single connection and integration point, DropShip Commerce helps trading partners streamline operations, generate more sales and fulfill more orders using the virtual supply chain.

Founder’s Story

DropShip Commerce is the culmination of a 14 year journey that took me from an Idaho farm boy to a respected entrepreneur up to his eyeballs in enterprise B2B software.

My first startup, GearTrade.com (now owned by Backcountry.com), kicked off a crash course in supply chain dynamics and the inefficiencies of matching product selection with consumer choice. When I started GearTrade, the idea was for an online ski swap, and I thought we were building a B2C company, but quickly discovered the real problem was matching supply to demand—a problem that in 2010 saw nearly $400 billion in inventory carrying costs and inefficiencies in the U.S. So GearTrade became a marketplace that helped specialty retailers and manufacturers deal with their closeout inventory—closeout inventory that they had because the crystal ball holders in this world—the merchandisers and buyers—have to predict the future, and they predicted wrong.

Right after I sold GearTrade to Backcountry.com, I founded Doba, a company that pioneered the idea of a virtual distributor/product broker service to help micro-retailers utilize drop shipping.

What I learned at GearTrade and Doba opened my eyes to a fundamental shift that is occurring in the retail supply chain and that represents a much bigger opportunity. From the beginning of retail, consumer purchasing was limited by two things: 1.) The geographic constraint of consumers and 2.) The physical constraint of inventory. In other words, retailers could only sell to people who lived near their stores and people could only buy products that retailers in their area chose to carry. That’s what kept outdoor recreation retailers from selling all their inventory and gave birth to GearTrade.

However, the last fifteen years have brought wave-after-wave of disruptions to the B2C world. The rise of virtual storefronts and ecommerce eliminated the geographic constraint for retailers, enabling them to sell to a worldwide audience online. And the search revolution and rise of Google eliminated the geographic constraint for consumers giving them a way to search for inventory from thousands of retailers from the comfort of their homes.

Opportunity

But while the B2C world has seen non-stop technology disruptions, the B2B supply chain has remained largely unchanged. Retailers and brands still experience the same constraint of inventory. Retailers can only carry so much inventory and brands must still push hard for shelf space and visibility in retailers’ stores and ecommerce sites.

The next step in the evolution that is upon us now is the removal of the physical constraint of inventory. Virtualization of inventory allows online retailers to adopt an endless aisle strategy and helps them because it reduces inventory risk while increasing product selection. It helps brands extend their reach and sell more volume. And it allows consumers to more easily find what they want to buy.

If this all sounds eerily familiar, well, it should. The drop shipping revolution was hyped and predicted in the early days of the Internet, complete with hockey-stick graphs of growth for drop shipping and direct-to-consumer fulfillment. So what happened? Well, it’s important to note that drop shipping didn’t completely fall on its face. It’s an integral part the strategy of many of the largest ecommerce sites like Amazon, Walmart, Staples and more. However, drop shipping never ‘crossed the chasm’ to widespread adoption.

If you talk to online retailers, most of them have high interest in drop shipping. Why wouldn’t they? Less risk and more products? Who wouldn’t want that? So why the lack of adoption? Well, in short, drop shipping is hard. Making it work at scale can be time-consuming and expensive.

Retailers who drop ship need to get product data on their site, pass orders to the manufacturer who ships to the customer, then get tracking back from that manufacturer. It’s not too tough when working with a single trading partner, but scaling means working with multiple (sometimes hundreds of) manufacturers, who in turn work with multiple retailers—and all parties use different data formats and protocols—which means that working with multiple trading partners can quickly become a nightmare of one-off integrations that are costly to build and difficult to maintain.

Differentiation

Performing and maintaining those integrations is exactly what existing solutions have focused on. Commerce Hub and VendorNet have been some of the more successful companies and are, not coincidentally, some of DropShip Commerce’s biggest competitors. What might be less evident is that they’ve most likely also contributed to the slow adoption of the drop shipping model.

They offer a closed solution that they will tie into retailers’ existing systems and then tie in the retailers’ vendors. In essence their solution is, “Let us handle your drop shipping operations.” It’s an outsourced department. Implementation is expensive, ongoing costs aren’t cheap, they make a cut on every order the retailer processes, and charge vendors fees to be part of the program as well.

Model

At DropShip Commerce, we believe these concepts are what has kept drop shipping from reaching its potential. Why? Because drop shipping isn’t just another fulfillment model. It is inherently different than the traditional supply chain. Because there isn’t a commit to buy, there is a different financial relationship in which the retailer has less leverage than they would buying inventory up front. The nuances of these new relationships require new thinking and new tactics.

As an alternative to the closed systems, outsourced model, and expensive fees that have held drop shipping back, we propose a new way. Our business model is built on the idea that retailers need to eliminate the cost and technology excuses of their vendors.

Our model is free to the vendors and offers a lower financial risk for the retailer. It empowers the retailer to onboard vendors and own the conversation and negotiation to ensure that technology and costs aren’t valid reasons to not participate.

We provide retailers and manufacturers the software and tools they need to manage their own drop shipping programs and have drastically changed the pricing model to a SaaS-based solution that doesn’t charge for every order processed. Our platform makes it easy to drop ship and capture more consumer demand and more total sales.

At DropShip Commerce, we’re not only pioneering the future of drop shipping, we’re providing solutions for the supply chain of tomorrow.

Marketing/Promotion

DropShip Commerce is working closely with strategic partners and solution providers, exhibiting at retailer-targeted trade shows and events, and employing several online marketing tactics to promote its solution.

Current Needs

Like any good startup, we’re always on the hunt for more customers, so if you know any retailers, manufacturers, or distributors that need help with their drop shipping operations, send them our way. Our product will knock their socks off.

We’re also looking for super-talented individuals interested in working on something great—especially if they have ecommerce, drop shipping, and/or supply chain experience. We have a great culture and get to enjoy the mountains of Utah.

DropShip Commerce – www.dropship.com

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