[EP 7] Modern Merchant Podcast: How COVID Sparked Renewed Interest in Dropship

Below, you will find a transcript of the episode.

Austin Rose:

All right, I should be live now. Thanks everybody for joining the next episode on our Modern Merchant Podcast. So in this episode, we are going to be talking about how COVID sparked a renewed interest in dropship, and today it’s just going to be myself and my CEO, Travis. Travis, thanks for joining us. Get a little mic check.

Travis Mariea:

All right. Mic check.

Austin Rose:

Perfect. Sounds great. I hope we sound great, but yeah, we’re pretty stoked. We’ve got these awesome new mics. Thanks, Trav. This sounds great.

Travis Mariea:

Yeti blue.

Austin Rose:

Yeti blue. Shout out. That’s our little plug, I guess for today. Let’s see real quick. Make sure everything’s working. All right, so let’s go ahead and get started. The topics that we’re going to be talking about in regards to COVID sparking a renewed interest in dropship. We kind of want to break down a handful of different sectors, because obviously COVID has affected all of us in all of these different ways, regardless of business or personal life. The main ones that we want to go over specifically in the e-commerce realm is supply chain, brick and mortar stores, just e-commerce sales in general, big box retailers, because they’re pretty much a big portion of a lot of things that are happening, but then really transitioning to the challenges of accepting dropshipping. So we’re going to talk about everything on both sides of the spectrum of those main five topics.

Austin Rose:

Before I get started, I just want to wish everybody a very happy National Camera Day, National Waffle Iron Day, and a National Almond Butter, Almond Butter Crunch Day. Those were today’s national holidays. So I hope you have a waffle iron skillet and you’re using that for waffles. Travis, I know you have one.

Travis Mariea:

Nailed it.

Austin Rose:

All right. Let’s go ahead and get started. Let’s talk about the supply chain when it comes to affecting e-commerce and COVID. All right. So, obviously 2020 was a crazy year and we saw this affect a lot of our business as well. We work with a lot of dropship suppliers and wholesale distributors and just the supply chain in general, just got completely corrupted just from obviously coronavirus starting in China, where most people are sourcing products from and then affecting everybody else in the world. And just being able to navigate that whole thing this past year, year and a half, let’s, before we jump into some stats, because we’ve got some really good stats for this specific segment. Travis, give us your initial thoughts on what you’ve witnessed personally, and through work in regards to a supply chain being disrupted from COVID.

Travis Mariea:

Sure. I’m just looking forward to the potential YouTube comments on this video about COVID starting in China and the debate that might ensue there. [crosstalk 00:06:39].

Austin Rose:

I’m sorry. Whoops.

Travis Mariea:

But yeah, it’s just funny. All right. So if we want to start off with the supply chain side. There’s a couple of things that I think we’re talking about why we saw an influx in general in e-commerce, we know that part, but specifically dropship. I think it’s pretty obvious the supply chain broke down and people kind of rethought a lot of different things across all of e-commerce, but specifically when it comes to dropship, one piece to think about is the COVID protocol and the social distancing and all of that, you had to, it went to keep your employees safe during this and that was kind of being passed down, whether it’s the CDC or whatever it might be, the recommendations that you were getting, you had to figure out how to run a warehouse, which is one of the toughest businesses to run or operations, I should say, to run with a social distancing type procedure in place because you’re going back and forth. You’re passing each other all day, you’re in these small confined areas going up and down aisles, right?

Travis Mariea:

So in general, warehouses had to shut down or become very limited in staff. And what we saw is we saw a lot of people that said, I was wanting to move away from my warehouse in general, or this became too big of a risk to even worry about how to manage a warehouse. There’s already been … I’ve already been approached by all these third-party logistics companies. I didn’t do it because things were working and it kind of pulled that trigger to say, “Okay, yep. I’m ready to look at 3PLs and look at outsourcing my warehouse because I don’t even want to deal with this. I don’t care if it’s a three-month thing, a three-year thing, whatever it might be.” This prompted that change. So you’ve seen, I think we just saw ShipMonk. I think it was ShipMonk or ShipBob.

Austin Rose:

ShipBob.

Travis Mariea:

ShipBob just raised $200 million at over a billion dollar valuation. You just saw ShipHero raise $50 million. You’ve seen the third-party logistics warehousing, agile, flexible warehousing space, whatever the industry you want to define it as, just blow up. And it’s because of this main piece of warehouses shutting people kind of making that move to outsourcing their warehouse and maybe kind of just seeing that influx and demand.

Travis Mariea:

And then there’s obviously the e-commerce just kind of push, like we will talk about here in another section, but with that, if you are outsourcing your warehouse and your logistics, it’s not technically what we refer to as dropship in that a lot of it can be still just direct to consumer brands and things like that, but it does open up a lot of suppliers to now offer dropship who did not want to, or didn’t feel confident in warehousing and shipping off individual items for a dropship retail partner, so it opened up that. It opens up, just in general, a more distributed fulfillment type strategy where, now you don’t have everything in a warehouse, it’s not only a third party warehouse. So that might force you to look at, “Okay, now if I have to support sinking with inventory somewhere else and sending orders somewhere else, maybe I can look at a new system, and a new operation that enables drop as well.”

Travis Mariea:

It’s very similar, right? There’s different risks, different things associated, but similar workflows. So just the fact that you had to shut down your warehouse, you might have now started outsourcing your warehouse, really put one, suppliers in a better position to provide dropship services and then retailers to be able to look at “Well, if we don’t control everything now, maybe we can, it opens us up to maybe do more in the dropship side of things, since we’re already outsourcing a good part of our business as well to a third party warehouse.”

Austin Rose:

And regardless of whatever we’re doing from a shipping perspective, regardless of dropship or wholesaling, somebody had to physically touch that product, right? Someone had to physically grab that and put it in a box or put it anywhere unless you had a very advanced warehouse management system of pick, pack, and shipping without human intervention. But a lot of us, a lot of distributors that we talked to, don’t have those capabilities. So that was just the number one thing that we saw. And I felt like maybe like 25% of the distributors that we work with kind of already adapted to what was going on, right when COVID hit. And we didn’t quite go on lockdown yet, but they knew.

Austin Rose:

There were a few that I can think of right now off the top of my head that were kind of prepared to an extent where they’ve fared okay through COVID, versus, I mean, we’ve seen how many people would be like, “Hey, we’re shut down completely. We can’t even go to the warehouse, we can’t do anything. We can’t do any of that.” And then that saw just stores closing down, just specifically from the supply chain. Because people are either doing dropshipping or they aren’t. So that was out of the gate, how it affected the supply chain.

Austin Rose:

And I’ve got some stats here. I want to read these off because these are really … I mean, they’re pretty eye-popping. They make sense, obviously thinking back at COVID, but what we’ve got and what we did. So these are some stats from RetailNext back in 2020 that 64% of retailers were challenged to adapt their supply chain for e-commerce. So obviously the majority of retailers had to adapt. 56 of them renegotiated their supply chain contracts. This one’s the standout for me, is 28% of them tried to find alternative sourcing options and then 28% underwent shortages or ran out of stocks. And the last stat, just to kind of know what we’re talking about stats, is there’s an estimated value of $1.14 trillion in out of stock items.

Austin Rose:

So the main call out there, and I think this is exactly why we sparked a renewed interest in dropship is only 28% of them tried to find alternative sourcing options. And now people are probably starting to realize when’s this next global pandemic going to hit? I mean, history repeats itself in a lot of different ways. So we need to be prepared for having an alternative mixed fulfillment. Right. Have dropship ready in case I can’t go to my warehouse. What stands out to you on these stats?

Travis Mariea:

Yeah. I think there’s a lot of cases where you just don’t have another option, right? So you’re working directly with the brand. At least it might feel that way. I’d be curious, are there scenarios where you’re already buying directly from a brand and you do have another option, maybe to go to a distributor of that brand as well. Obviously you’ve gone directly to the brand for years and you never thought about going to distributors, it makes no sense because there’s less margin, but maybe in this case, if they were holding the inventory, that might be a good backup option, right. So establishing a relationship with a distributor, even when you might never use them, you’ve already got a direct relationship to a brand, might seem backwards to a lot of retailers. They’re like, “Why would I even talk to a distributor? I can just buy directly from the brand.”

Travis Mariea:

Well, having it backed up for … I mean, I wouldn’t say you have to run your whole business around another global pandemic, but at least having the backup for, if there is a run, having alternative sourcing option ready to go, and just what we’ve talked about in the past, and not to go too much into it because I know we said it, buy you buy in bulk from that brand. If you want to have kind of some overlap and not have everything in your warehouse, even sourcing from a distributor as well and having that kind of dual sourcing model can make a lot of sense and it can protect you for, whether it’s a run because of pandemic type related incidents or just a run on the product in general.

Austin Rose:

Yeah. Just anything. I mean, who knows what could be next. One of the last quotes that I wanted to quote here was from Apparel News and this came out a couple of months ago, but after a rocky start in 2020, the markets are obviously beginning to pick up, but they say supply chains need to have a digital backbone that supports end-to-end visibility and the ability to react quickly to any potential changes. So, there’s new stations out there. I mean, obviously this is in the apparel industry that specifically calls out the supply chain need to have a digital backbone. And how many people do we see that have some type of supply chain, some distributor we work with, that doesn’t have a good digital backbone, right? And so it’s something that just sped up the conversation, right?

Travis Mariea:

Yeah. And I’ve seen that term a lot. We liked the term distributed fulfillment, but there’s also a lot of people saying a digital supply chain or a virtual supply chain. That can refer to anything from third-party warehousing, like a ShipHero or ShipBob, ShipMonk, all those guys, or it could also refer to dropship, right. Basically just having a supply chain that is connected and not a physical … The relationship of a supply chain, but is actually sinking data and integrating it at any time, whether you’re drop shipping or just storing bulk inventory in warehouses. So it’d be interesting to see how the terminology evolves as we go more digital with a lot of things here in the next five, 10 years.

Austin Rose:

Yeah. I’d be curious to know who starts trying to implement as much machine fulfillment as possible in their warehouses. How much can we get to a point that there’s no human interaction at all?

Travis Mariea:

Yeah. That’s down the line. That’s for someone who’s a little more involved in that. I’m sure there’s a lot of glitz and glamour around the robot stuff that is, I’m sure going to help in a lot of different areas, but it’s sure pretty tough to implement for most of the bulk of warehouses. No doubt.

Austin Rose:

Yeah. A bit of cleanliness, too. Okay, cool. Let’s move on to the next one. Let’s talk about brick and mortar retailers. So obviously with COVID hitting pretty hard, and if you were only specifically selling in your brick and mortar store, you got hit one of the hardest. And so we’re getting off this supply chain, now we’re moving into the sales. And if you had a physical presence, you couldn’t open up. You couldn’t open up a shop, people couldn’t buy your stuff. And if you didn’t have an online presence, I mean, that really kind of just screwed you, to be honest. You weren’t able to stay in business. And so let’s read off some of these stats, because these are just showing exactly how COVID has affected a lot of brick and mortar stores.

Austin Rose:

Retailers have confirmed that more than 1,000 stores will close in 2021 so far. This is almost specific to just the big box retailers that have physical stores. They have Disney, Best Buy, and Macy’s planning to close a lot of locations. And we’ve seen that a lot throughout 2020. They’re saying that over 8,000 US stores closed last year, and it’s a possibility that 10,000 are going to close in 2021. And these are specifically just brick and mortar stores. Some of these might have an online presence and they just moved digital.

Austin Rose:

But one thing that Business Insider said, and you’ll see this a lot from a company like Business Insider, they said dropshipping is now a major force in retail, at least 40% of retailers use it. I mean, that’s huge. I bet if you talk to somebody that was in dropship five years ago, I bet we weren’t at 40% or maybe we just didn’t know that we were at 40%, but that’s going to be an ever-growing thing about brick and mortar is having an online presence. So from a brick and mortar perspective, what does your mind go to in regards to what they, if someone weathered the storm of COVID, what do they need to do next to be ready for obviously not another pandemic, but this shift to dropship?

Travis Mariea:

Well, once again, it was just kind of, it allowed, or it forced, I should say. It forced a lot of people to rethink what they were doing and forced their hand on doing stuff they’d been wanting to do. So I think it was Shopify, they mentioned it pulled us forward, pulled the industry forward … I don’t want to misquote, not 10 years, but like 50 years, right, or something like that, where it just pulled us forward on what people had been wanting to do. Maybe we’ll look up exactly what Toby said on that, but maybe it was 100 years who knows, but it pulled us forward basically and it forced people to kind of go online and to rethink when you can really kind of rest on your laurels, when you had foot traffic coming through your brick and mortar, where now you had to get online.

Travis Mariea:

And so, because you got online and it forced you to kind of get your catalog up, take pictures of your items, maybe look for other distributors that carry the same items as you, or work directly with the brand to get images, to get content, product data, all this stuff that goes with online, but you don’t have to do in a brick and mortar scenario, right? You don’t need to write product descriptions if you’re going to put some on your shelf. And a lot of times these brick and mortar stores have a quarter or a half or not even that on their shelf that’s on their actual online store, it forces him to get more inventory up. They looked for ways to easily do that, that opens up dropships, right?

Travis Mariea:

A lot of these larger distributors, the value add that they have, we talked about is the distributor dead? One of the value adds of distributors in the last podcast, but one of those value adds is adding and having the product data, even though you’re not going to want to use the same title and description of every single item that you get from a distributor for SEO purposes, there’s a lot of reasons you want to rewrite it and write your own unique, great copy, having that title, that description and having a base to start is huge when you’re having to very quickly get online. You can go and rewrite later or you can rewrite as you go and just modify some of it. So I think that opened people up to say, how do I get a bunch of products online very quickly? Dropship makes a lot of sense. Yeah, and so I think that kind of forced them to get there, and whether they wanted dropship or not, it was a logical kind of conversation like, “While we’re doing this, might as well start rethinking about drop ship again.”

Austin Rose:

Yeah. And getting online for them too, it’s funny when I think about it, because obviously we’re in the space of data automation. So when it comes to getting on Shopify, getting my supply chain hooked in, integrating data, integrating inventory, it’s kind of second nature to us. And I feel like for a lot of brick and mortar guys, it’s terrifying, this concept of selling online, and all this data and they probably just think of spreadsheets. And it’s like, it’s kind of a feat to think about, but it’s funny because it’s not the hardest thing to do, right. It’s not hard to get an online presence. It’s not hard to find somebody like us or an inventory source or any of these, any of these other SAS companies to help with the data side. Where a lot of brick and mortars have a leg up to get started online is they already have an audience. They already have people that know their name in the community or wherever they’re selling, in their region and things like that.

Austin Rose:

That’s one of the hardest things with selling online is you can get a website up there, but there’s nobody going to your website unless you get an audience and have a repeatable customer base. So these guys actually have those customer bases. And to be honest, I would rather, especially in the world of a pandemic, I would rather buy something from them in their online store to support my local business. And so that’s the thing where brick and mortar sometimes have a leg up when they go online because they already have that audience and that customer base.

Travis Mariea:

Well, they only have a leg up because they already have a brand and somewhat of an audience out there that they can leverage. I have seen a lot of brick and mortars think I’m just going to do the same kind of business, but online.

Austin Rose:

True.

Travis Mariea:

They very much realized very quickly that this is a whole new ball game, but I would completely agree with you that it’s better to have some kind of established brand and someone on a newsletter list and hopefully they’ve been gaining emails or at least want to tell about it that cares, that’s walking in every day, but it is a very different game. And I think what will be interesting to see is that with all the brick and mortar moving online, like they did in the last year to two years, the services and the online advertising platforms and just everything around like … It’s not just dropshipping. It’s obviously all of e-commerce, but all the SAS companies around e-commerce because all these brick and mortars are going to need a lot of help building a digital strategy and executing on a digital strategy because acquiring a customer and converting them on your website is very different and much more difficult, at least it’s a different skill set than it is when someone walks in to your brick and mortar store and be able to get them to buy that shirt off the rack.

Austin Rose:

Yeah. I think what was it? So we’ve been attending the e-com world. That’s what’s been going on this week and I was listening to Harley Finkelstein say that, gosh, I totally said his name wrong, Shopify president. Yeah. Shopify president, he was mentioning that he was … We were actually talking about COVID and he was talking about the timeline of how much COVID has sped up e-commerce in general. And he was like, “I’m not good with sports analogies, but this is where we’re at from a sports analogy perspective.” He’s like, “So there’s a baseball game going on, and where we’re at, for where the market’s at in e-commerce and how COVID sped us up.” He was like, “We’re the team, we’re still in the hotel room.” He was like, “We’re not even into the stadium yet. We’re not even in the pregame. We’re not even to the first inning, we’re not even to the second inning.” He’s like, “We’re still at the hotel.”

Austin Rose:

He’s like, “I see so much untapped potential for the online e-commerce realm. It got sped up, because of COVID, but we’re still not even to the game yet. We’re not even in the stadium yet.” So I just thought that was an interesting quote of how there’s just still so much that we’re going to grow in e-commerce for the foreseeable future.

Travis Mariea:

Yeah. Sure.

Austin Rose:

All right. Let’s move on to the next one. So we’re going to now talk about e-commerce sales. So transitioning from brick and mortar to people that are actually selling online, and this is kind of like the double-edged sword, right, people still need products, right? People still need things to buy. They went online, but it was hard to source products. So it was kind of like that. And we had a bunch of business, but we couldn’t fulfill on stuff. So again, a double-edged sword. Let’s talk about the good stuff, which is the big numbers.

Austin Rose:

So e-commerce was expected to bring over $843 billion in sales this year, surpassing expectations of what we originally thought for 2025. So what we did in 2020 from an e-commerce perspective was by far surpassed what we thought would be in 2025. So obviously COVID, that shows that COVID sped that up, that’s from ROI Revolution. E-commerce accounted for nearly three quarters, 74.6%, of the gains in total retail in 2020. This Is the highest share of overall annual growth. The online sector has been represented. That was from Digital Commerce.

Austin Rose:

And then this is a really interesting one that I like. More than a dollar is spent for every $5 for retail purchases in Q4. So for every dollar that was spent on retail purchases, that went from an online order and Amazon accounted for more than half of e-commerce gains in the United States. So again, obviously a double-edged sword, we saw this stuff from the supply chain perspective affect us, but e-commerce skyrocketed obviously, because of COVID. What does the future of e-commerce look like to you, Travis? And then a follow-up question to that, because I’m really curious on this next one is how is that going to affect the SAS community too?

Travis Mariea:

Yeah, sure. So before I get to that, I think one piece of the e-commerce sales part, I want to talk about specifically how COVID really drove e-commerce sales in a different way as everyone’s buying behavior changed. You weren’t buying suits. We saw that with Brooks Brothers going out and really kind of nailing the coffin for them. I don’t know where they are in the rebuilding or where that might land them, but they’re not buying suits. They’re not traveling, obviously, right. But there’s a lot of e-commerce, physical products that were just not being bought. And then for the first time there was this huge demand and much more at least in athleisure wear, right, for work from home and work from home desks and office furniture and things like that.

Travis Mariea:

So, what was interesting was we saw a rise in overall e-commerce because people had to shop online, but they’re also shopping for new products. One, they were shopping more because they had to get new products and it was this whole new category around the pandemic. So it forced these retailers to really, mostly like the resellers on that side of the spectrum, to go and pivot a little bit and bring in new products into their mix, especially from the apparel side of things, how that changed drastically from the business professional and just the work from home kind of lifestyle. But we saw that really happen. And I thought that was really interesting to see. People had … It was a shift, it was a transition. You make money in transitions, right. Think changes, and the first person to capitalize on it, is going to make money when people have a new need. I think that goes back to having that agile and flexible supply chain where you’ve got the ability to easily pivot to a new category. So that was really interesting to see.

Travis Mariea:

And then just in general, that’s why e-commerce blew up. And then going back to how this affect the SAS community, it’s exactly what I was just saying on the prior one. There are a lot of people trying to figure out how to do this new activity of online sales at scale. They might’ve done it a little bit, dip their toe in the water, had a brick and mortar be 80% and Shopify was 20% or whatever their stores on big commerce, wherever it might be. Now, they’re like, “Well we need at least a 50/50 split, or we need to go more online to 100%.”

Travis Mariea:

A lot of these companies are being sold and liquidated to these holding companies. I think who it was, Pier One Imports and a couple other people are just being sold and kind of gobbled up for the brand and the customer list and the sourcing partnerships. And they’re going pure, from 80/20, 80% brick and mortar, 20% online to 100% online, right. Because these companies have expertise in online conversions, right? Like that new ballgame that we talked about. They know how to do this, versus Pier One’s management did before they went bankrupt and all the other bankrupt company retailers that are kind of … All the retailers are going bankrupt. So, it’s going to be really interesting to see as people shift and figure this out, how to execute on these new strategies. It’s just a ton of SAS companies just sitting there waiting to help people do that, help retailers adjust and suppliers.

Austin Rose:

So with, obviously people are adopting dropship, it makes sense for that mixed model approach. We’ve already talked about stats and different ways why that’s kind of supporting it. Do you see … Something I’ve thought about is do you see a downward trend coming soon? Everything, a lot of, I mean, we’re … Florida’s open, right? A lot of states are opening back up. Not just our country, but other countries are starting to open back up. I’m wondering if there’s ever going to be a downward trend of online sales, just because people want to get back into feeling that t-shirt, right. Trying that suit on, right. I mean people are getting married still, so it’s like, got to still get the good suit to go to the wedding and things like that. But I’m wondering if there is ever going to be this moment either this year or next year of brick and mortars are going to have some crazy resurgence because everybody’s tired of, of the online, or do you think that’s just a stupid thought?

Travis Mariea:

I mean, I don’t know. I wouldn’t say it’s a stupid thought, I think it’s no one can predict the future. It seems like all indicators lead to online shopping being a better experience and there should be more available online and people should be more comfortable with doing it. So you think it’s only going to increase as a percentage. It might decrease from people who went online and were scared of going outside and buying their groceries, doing all of that and so they didn’t go into Publix or whatever. So you might see a decrease from just overall how much online e-commerce sales are happening because people were forced to do it or did not want to go outside and that might slow down.

Travis Mariea:

But I think in general, it’s going to be increasing as it has been as a percentage because it is going to be easier. There’s more wider selection, there’s a wider selection online, right. You have the ability to find more online. So with that, it is all retail, right? It’s all commerce. It’s going to be a bigger portion, but brick and mortar, physical goods, and touching a physical good and going into a retail store, I do not think is going anywhere anytime soon. It’s just all evolving. It’s what we’ve been talking about when they coined Omni channel 10, 15 years ago, it’s just been pulled forward, whatever 10, 20 years.

Austin Rose:

Yeah. It’s whoever can pivot the best, right. Pivot with a different selection of items, pivot with a different experience.

Travis Mariea:

Exactly. It’s business 101. Who can give the customer what they want? And the customer wants something different now and is demanding it more so where, I being in e-commerce, I’m a bad online shopper. I don’t shop much in general. I have to ask my wife most likely, how does this work and give me some ideas and what do you use? And because I just don’t shop very much. And when I do shop, I really walk into most brick and mortar stores because that’s just me. But I’ve been actively trying to shop more online to support the e-commerce wave. But in general, I feel like I am just because of the pandemic and this move and you know, I do feel like I do want a more of an online experience, more so than I did prior. And that’s just me. But I think customers in general are going to come to expect it because everyone did pivot. Everyone else stepped their game up, and I think that’s going to kind of just drive the overall demand.

Austin Rose:

Yeah, absolutely. All right. So let’s move on to the next topic. And this is one that I feel like a lot of people instantly thought of first when the pandemic hit. And that is like how these big box retailers were going to be affected. Obviously the Dick’s Sporting Goods of the world or the Home Depots of the world … Personally, if I need to have any type of hardware for the house, I want to go to Home Depot. Like I don’t want to buy online from Home Depot. I want to go check it out. I want to get lost in the store because that’s just a part of the experience of just not knowing what aisle stuff’s on and I just want to … You want to smell it. You want to go to some of these big box retailers, but we couldn’t.

Austin Rose:

So there was this shift of like, how is COVID going to affect them and how much are they going to turn to dropship? We already noticed this and people don’t even know that Home Depot and a lot of these other big box retailers, they’re already dropshipping. They’ve been dropshipping for a while and people just don’t know it. I go online, I buy a … Stick with Home Depot. I buy a Ryobi, I don’t know, weed whacker. And that gets sent to me by Ryobi. But you never really knew that, dependent on that’s actually being dropshipped from the brand. It’s not actually coming from Home Depot. But what’s your initial thoughts on the big box retailers and how they were affected, especially turning to shifting to more dropship now, too?

Travis Mariea:

Yeah. I mean maybe they are. I know Home Depot;s always, [inaudible 00:34:54] They’ve always had a dropship piece of their business with some brands that they work with there. And I don’t know if it’s increased with them as much. Maybe it has. You would think based on all the stuff we’ve talked about, but big box. I mean, they’re having record numbers because of just the shift and what has been bought in the whole stay at home, not going on vacation. So I think there’s those that will flourish still, and it’s tough because like you said, we’re in Florida and it feels like for a while now that it’s been back to normal and it’s almost like we’re going, I’m going to Home Depot the same way I did two years ago, and I’ve been doing that for awhile.

Travis Mariea:

So it’s interesting. I don’t know how much of an impact it will have on those big ones, the ones that were not already teetering. It’s almost like a culling of, like I mentioned, the Pier Ones, the other ones that just didn’t have this digital presence and supply chain kind of figured out, that didn’t benefit from the changing consumer demand. So, I think it’s just, it was a wave that took away and really kind of killed off those that were already going to be going bankrupt here in the next five to 10 years. Really the best way to describe it is how we have been, it just pulled everything, accelerated everything towards 10 years ahead. And those that were going to go out of business or were not able to adjust as quickly and did not benefit from the change in demand were just wiped out. So nothing crazy outside of just that. This just really kind of pulled forward what was going to probably happen and then forcing it to happen for those that couldn’t quickly adjust and had not invested in ways to be able to adjust.

Austin Rose:

Yeah. And you bring up a good point because I think the … I don’t know what specific term they would fall under, but like the middle big box retailers, the medium box retailers, right. We’ve got a stack here from Footlocker, right? Footlocker I wouldn’t say is the pinnacle, big box retailer, you think of like a Target, but they’re still a huge … I mean, how many Footlockers were in a mall back in the day? But what they did is they announced that they were starting a piloting program, a new dropshipping program with Nike. They did that, it said last quarter, I think this came out in 2021, so this must have been from at the end of 2020. And then Nordstrom said that during an investing day last month, it plans to carry more products on a dropship basis going forward.

Austin Rose:

I feel like Nordstrom’s a little bit of a higher tier, but the Footlocker is definitely kind of in that middle tier. And that is interesting that you bring that up because I didn’t even think about that. There are so many of these retailers, at a town center, at some strip mall down the street, that we never really thought of that was probably highly affected by COVID and they needed to pivot and dropshipping was a great way of pivoting. And we’re now starting to see stats of people actually doing it. Now, am I going to go buy shoes off of Footlocker’s website? I don’t know. I mean, I’m not a big shoe guy, but it all depends. And it also kind of goes into play too, who’s helping these people out, right? There’s a lot of SAS companies in place that are going to try to help them out from a dropship perspective.

Travis Mariea:

Well, the Footlocker thing is, it brings up a good, something I wanted to touch on, which I think is kind of interesting that was kind of obvious, but I missed it earlier is, a big, the brand side was really affected by this as well. We’ve been talking a lot about retailers, but the brands were affected and what really happened to them for the first time in a while, or ever for a lot of these guys maybe, is they just need big POs that they’re used to receiving from a Footlocker, from a Nordstrom or whatever for hundreds of cases of this or whatever it might be. They stopped. They said, “Hey, did you check outside? There’s a global pandemic. We’re not sending any that typical quarterly PO we send to re-up our stock.”

Travis Mariea:

And so for the first time ever, they were like, “Wow, I don’t get these huge POs that I’m used to, I need to really …” They pulled forward their D to C stuff, their direct to consumer side of their business. How do we go more direct to the consumer? And then how do we support whether the retailer is requesting it or not, or the brand had enough foresight to kind of promote this? How do we support dropshipping? Okay, don’t send us that big PO, but can you just still send us orders? Can we get products up on your website? If you are going more digital and you’re going from 80.20, and then for the next year or whatever the pandemic is going to affect you, you’re flopping that to 20/80 digital versus, online versus in store. How do we support that? You might not send me a big PO, but at least put my products on your website that might not already be there. I’ll be able to dropship for you. Therefore, leading to talking to people like ShipHero and ShipBob and ShipMonk, to figure out how they can dropship.

Travis Mariea:

So all of that, all of those factors really kind of drove that. So it was interesting to see the Footlocker kind of stat because I can certainly see … I don’t think it was the case for Nike, but a lot of brands saying I’m not going to, are not receiving a big PO, really affected them and then pull them forth on dropshipping, and then Nike has just come out recently just saying, just in general, maybe they did get less Pos or whatever. They just have decided to go almost more, I think it’s … I don’t know if they’re going exclusive or they’re doing more for Adidas [inaudible 00:40:27] and then Footlocker might be saying, “Well, hey, you’re not going to allow us to buy products in bulk anymore.” And I think Nike is kind of saying that for margin purposes and just to control the brand, but can we drop ship and still advertise? So, I mean, I think there’s some more of those conversations happening too. Might not be at all the case with Nike and Footlocker, but I can certainly see that coming up in these conversations between the two parties.

Austin Rose:

Yeah. There’s almost another episode of how COVID affected people going online and then how COVID affected people changing or not changing, but shifting to dropship or having some type of interest in dropship, because I feel like there’s a big gap between I was never selling online or I was only doing bulk freight fulfillment to I’m selling a dropship model online. I felt like there’s so much in between of like you can’t like, there’s so many boxes you have to take and things you have to put in place to go all the way into a digital backbone like we talked about earlier.

Travis Mariea:

Yeah.

Austin Rose:

Okay. So let’s now talk about the challenges of adopting dropship. We’ve talked about the brands, we talked about the retailers most of all, but we just recently started talking about the brand, just talked about supply chain, talked about distributors. I mean, we talked about anybody from manufacturing products to buying products, everything in between. So if I’m listening to this podcast and I’m thinking, “Okay, how do I need to start this dropshipping process? Or how do I need to ramp up my drop shipping process? How do I leverage this as much as I can for my business?” What’s the one thing that you would advise somebody in regards to adopting dropship or scaling dropship based off of what we’ve seen with COVID in the past couple of years?

Travis Mariea:

Yeah. Let’s say just to maybe kind of an end cap on the kind of COVID side of things, right. You’ve got disrupted, COVID happened, there’s this pandemic and now you need to adopt a new strategy and dropship you decide is a piece of that strategy. Yeah. I mean, it’s really going to your existing suppliers, your existing vendors that you already work with having the conversation about how can we support dropship? What technology do you use? If you’re not using the dropship system already, talk to your current software provider that you’re using, looking for software specifically that focuses on dropship. Something that is worth noting is your current ERP, your current order system, if you’ve been on them for five to 10 years, they probably don’t focus on dropship, so you should really take that into consideration. It’s a little bit harder to bolt that on versus the other way around. So you might want to look for someone that specializes in dropship obviously, but if from a COVID perspective, we’re on the downhill, the down slope of it, hopefully it seems, from what we’re seeing and you probably have already faced this, but just in general, I think, starting with your own partners, looking around is all you can really do.

Austin Rose:

Yeah. And I think the last thing for me is, and someone brought this up, it was like electronic communication. So specifically COVID has kind of ramped up, not just communicating with other external parties, but just in general, connecting from a data perspective, from electronic perspective, there’s no more of that human touch or at least there wasn’t. And we can get by without it kind of thing, but that’s kind of what we’ve shown in I feel like, in a COVID world, but yeah, no. Great thoughts. Anything else?

Travis Mariea:

No. No, this is something we’ve been wanting to talk about, I think it was good to get it. I think it’s still relevant as COVID’s very still much, very much still in the conversation. And we did it at a time where we’ve had enough time to see how it really played out and people are going back into brick and mortar, especially here in our great state of Florida, but really with that, we’re still seeing that it’s not going away, this push in e-commerce. So I thought it was an interesting topic to do. So a good job for helping me think that one up. So yeah, that was about it, really.

Austin Rose:

Yeah. No. Perfect. And if anybody has any questions, smash that subscribe button, ask us questions in the comments, go to flxpoint.com, without the E. Contact us that way. I hope everybody enjoys their almond butter crunch later today. I know you’re going to get some Travis. I don’t even know what that is, to be honest, but stay tuned for some episodes coming up. Thanks everybody for watching. Stay tuned for more.