Virtualstock Bring Dropshipping Tech To The NHS (Part 2) – The Edge

Yesterday, we described the early days of supply chain technology provider Virtualstock (VS), and explained how their product started to get traction as the concept of “dropshipping” took off in the retail sector. Dropshipping describes the situation whereby a website offers products for sale that do not physically come through that retailer or website owner’s own supply chain

Now dropshipping sounds simple in theory, but when you consider it more carefully, it comes with a range of challenges. Let’s take Tesco as an example. If you order something from the Tesco website that is a dropship item, that order needs to go to the firm who actually hold stock of the product and will carry out the order. So the Tesco website needs to know who that is, that the item is in stock and that the order can be accepted.

The website has to have the correct product information; retailers need to be able to induct products rapidly in order to have new and relevant ranges online. Tesco then need to know the product has been delivered successfully, and that there are processes in place and successfully executed if there are returns, complaints or other issues.  So not as easy as it first sounds. As Bradley says, “the only way dropship works in a retail environment is if it is totally frictionless”.  Otherwise the retailer ends up with plenty of “wismo” calls and emails (that stands for “where is my order”), which leads to increased cost for the retailer and a poorer customer experience.

And remember that Tesco might have thousands, tens of thousands even of these drop-shipping suppliers, who will themselves use hundreds of different distribution firms and mechanisms. So the beauty of the current core VS product (“The Edge” as they call it) is that it enables Tesco to see everything across their supply base, inventory, orders, product information …

When VS started pitching The Edge as a solution to these issues, drop-shipping only represented a few percent (if that) of most retailers’ business. But VS were ahead of the curve here; for some retailers, drop-shipping can be 40% or even more of their on-line business now, which itself is a more significant and ever-growing proportion of total sales. So the focus is still growing, and VS has been well-placed to gain from that, picking up major customers like Tesco, Maplin, John Lewis, Sainsbury’s Argos, Office Depot and many more.

In terms of their fast-developing NHS business, work is going on with quite a range of Trusts now as well as NHS Business Services. The retail experience translates across well in terms of handling huge number of suppliers, monitoring stock and enabling effective catalogue presentation to the order placers. The VS price-comparison background also comes in useful here, and the system will prompt an order-placer if they order from a more expensive supplier than is available.

What is it that sets VS apart from the players in the general purchase-to-pay market who also offer marketplaces, catalogues for user ordering, and supplier networks? (That includes Basware / ProcServe, SAP Ariba, Coupa, BravoSolution etc).

It may be the elements that come from the retail background of the firm, which is why their history is worth knowing. So that element of stock reporting is vital, and something we don’t always see in P2P. The ability to take unstructured data from many thousands of different suppliers and convert it into multiple different customer formats for on-line catalogues and indeed feed into other customer systems is also important, and not commonplace.

As a private firm, VS does not release full financial information, but Bradley talked about recent (profitable) growth rates that are very impressive, and the firm is also growing in headcount rapidly. Their growth has come largely from internal funding, but we can’t help wondering this. If the product is as good as it seems to be, would it be worth going for even more rapid growth, perhaps including overseas expansion, before someone with deep pockets catches up from a technology point of view?

The client list is already very impressive (Tesco, Argos / Sainsbury’s, B&Q and now the NHS of course). That could be leveraged more widely perhaps from a sector and geographical point of view. Nothing against Coupa, but it would be nice to see a UK tech company in our sector reaching the “unicorn” status that firm achieved last year!

 

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