How Can Brick-and-Mortar Stores Leverage Hybrid Dropshipping to Grow Their Business?

Brick-and-mortar retailers face unique challenges in today's digital-first marketplace. While online sales continue to grow at impressive rates, physical stores still account for the majority of retail transactions. The key to success lies not in choosing between physical and digital, but in creating a strategic blend of both through approaches like hybrid dropshipping.

What is Hybrid Dropshipping?

Hybrid dropshipping combines in-house inventory management with third-party supplier fulfillment. Unlike traditional dropshipping where you never touch the inventory, this model lets brick-and-mortar retailers maintain select stock in-store while partnering with suppliers to fulfill other products directly to customers.

This approach gives physical retailers a significant advantage: they can offer the tactile shopping experience that online-only retailers can't match while expanding their product selection beyond what their physical space allows.

Why Physical Stores Need Hybrid Fulfillment Strategies

In 2023, over 80% of retail sales still happen within physical store locations. The challenge for brick-and-mortar retailers isn't about competing with online shopping, but incorporating digital advantages into the physical shopping experience.

Stores that successfully blend online and offline experiences can create significant advantages:

1. Expanded product selection without increased storage costs
2. Reduced inventory risk on seasonal or trendy items
3. Improved customer experience through greater product availability
4. Better cash flow management by minimizing inventory investment
5. More flexible response to market changes and customer demands

Key Benefits of Hybrid Dropshipping for Physical Retailers

1. Expanded Product Range Without Expanded Storage

The most immediate benefit of hybrid dropshipping is the ability to offer virtually unlimited inventory without expanding your physical footprint. Imagine a home goods store that carries its top-selling kitchen appliances in stock but offers a complete catalog of niche cooking tools through dropshipping suppliers.

This approach allows customers to browse and purchase from a much wider selection than what's physically available, reducing the chance they'll leave to shop elsewhere. When implemented with in-store digital kiosks or tablet-equipped sales staff, or an online store, customers can seamlessly order items not currently in stock.

2. Test New Products Without Risk

Hybrid dropshipping creates a low-risk method to test market demand for new products before committing to inventory purchases. A clothing retailer might use dropshipping to offer a new style or brand, monitoring customer interest before making wholesale purchases.

This "try before you buy" approach to inventory lets stores experiment with product categories and identify winners before allocating valuable shelf space and capital.

3. Enhance BOPIS (Buy Online, Pick-up In Store)

BOPIS has become an essential retail offering, with 37% of shoppers using it and half of those rating it as "important" or "extremely important." Hybrid dropshipping expands what customers can buy through BOPIS by including dropshipped items in the mix.

For products that dropship directly to stores rather than customers, BOPIS becomes even more powerful, driving foot traffic and creating opportunities for additional in-store purchases. Research shows that 90% of shoppers who pick up online orders in store make additional purchases during their visit.

4. Reduce Inventory Costs and Improve Cash Flow

By stocking only best-selling items and dropshipping the rest, retailers can significantly reduce inventory investment and carrying costs. This frees up capital that can be used for store improvements, marketing, or other growth initiatives.

Physical retailers using hybrid models have shown inventory turnover improvements of 30-50%. Apple, for example, reduced its inventory days on hand from 7.5 to 3.4 (a 55% decrease) by optimizing their supply chain with digital integration.

5. Create New Revenue Streams

Hybrid dropshipping opens the door to entering entirely new product categories without significant investment. A sporting goods store might expand into adjacent categories like outdoor furniture or camping equipment through dropshipping partners, creating new revenue streams with minimal risk.

How to Implement Hybrid Dropshipping in Your Brick-and-Mortar Store

1. Define Your Order Process

Start by mapping out your entire order fulfillment workflow. This means understanding every step from when a customer places an order to when they receive their product. For brick-and-mortar stores implementing hybrid dropshipping, this includes deciding which products will be fulfilled from your physical inventory versus dropshipped from suppliers.

Create clear protocols for order routing based on inventory location, shipping costs, and delivery timelines. This foundation ensures customers receive a consistent experience regardless of fulfillment method.

2. Centralize Your Inventory Management

For hybrid dropshipping to work effectively, you need a comprehensive view of your inventory across all channels. This includes stock in your physical store, warehouse inventory, and products available through third-party suppliers and manufacturers.

Real-time inventory visibility prevents the frustration of selling products that aren't actually available and helps you make data-driven decisions about what to stock in-house versus dropship.

3. Automate Order Routing

Implement a system that can intelligently route orders to the appropriate fulfillment source. When an order comes in, your system should automatically determine whether it should be fulfilled from your store, warehouse, or dropshipping partner based on product availability, location, shipping costs, and delivery times.

This automation eliminates manual decision-making and ensures orders are fulfilled in the most efficient way possible, improving both operational efficiency and customer satisfaction.

4. Optimize Store Layout for Omnichannel Fulfillment

Physical stores implementing hybrid models should consider how their space supports new fulfillment methods:

• Designate areas for online order pickup
• Create efficient workspaces for processing shipped orders
• Consider implementing pickup lockers for after-hours collection
• Train staff on both in-store customer service and online order fulfillment

Some retailers have seen significant benefits from creating dedicated spaces for BOPIS customers, with reported conversion rates 50% higher for first-time buyers compared to online-only purchasing.

Leveraging Data for Better Merchandising Decisions

One of the significant advantages of hybrid dropshipping is access to better customer data across channels. This information can inform smart merchandising decisions:

• Identify which products sell best online vs. in-store
• Determine which items customers prefer to see before buying
• Analyze cross-selling opportunities between channels
• Personalize marketing based on omnichannel purchase history

Retailers who effectively use this data can create highly targeted merchandising strategies that maximize both physical and virtual shelf space.

Overcoming Hybrid Dropshipping Challenges

Quality Control

Since you don't inspect dropshipped items before they reach customers, quality control can be challenging. Mitigate this by:

• Thoroughly vetting potential suppliers
• Ordering samples before partnering
• Starting with a limited product selection from new suppliers
• Monitoring customer feedback closely

Inventory Synchronization

Keeping inventory accurate across multiple channels requires robust systems and processes:

• Implement real-time inventory updates
• Set buffer stock levels to prevent overselling
• Create clear protocols for inventory discrepancies
• Conduct regular reconciliation between systems

Customer Service Complexity

With orders coming from multiple fulfillment sources, customer service becomes more complex:

• Train staff to handle inquiries about both in-store and dropshipped items
• Develop clear policies for returns and exchanges across channels
• Implement systems that provide order visibility regardless of fulfillment method
• Create consistent branding across all customer touchpoints

Getting Started with Hybrid Dropshipping

Begin your hybrid dropshipping journey with these steps:

1. Analyze your current inventory performance to identify what should be stocked versus dropshipped
2. Research and vet potential dropshipping partners in your product categories
3. Implement inventory management technology that can handle hybrid fulfillment
4. Train staff on the new model and digital tools
5. Start small with a limited category expansion before scaling

By thoughtfully implementing a hybrid dropshipping strategy, brick-and-mortar retailers can combine the best aspects of physical and digital retail, creating a more flexible, profitable business model built for long-term success in today's evolving marketplace.

How Flxpoint Can Help With Hybrid Dropshipping

Flxpoint simplifies hybrid dropshipping for brick-and-mortar retailers with a centralized platform that connects all your inventory sources. Our system provides real-time visibility across your warehouse, store, and supplier inventory while automatically routing orders to the optimal fulfillment location.

The intelligent analytics help you decide which products to stock in-house versus dropship, optimizing both your physical and virtual shelf space. For retailers ready to expand beyond traditional models without the technical headaches, Flxpoint provides the foundation you need.

Ready to transform your retail business with hybrid dropshipping? Book a demo today to see how Flxpoint can streamline your operations.

Flxpoint – Powerful Dropship and Ecommerce Automation Platform