February 2017

Mohammad Anas Wahaj | 25 feb 2017

'Drop Shipping' is a practice adopted by retailers where orders are shipped directly from the supplier's warehouse. It gives retailers opportunity to provide more products on their website without keeping them in stock, thus saving on inventory. Some analysts predict that drop shipping will be a mainstream process this year. According to a retail industry survey by SPS Commerce, 40% of respondents said they expect more drop-ship vendors in 2017. This will also benefit logistics companies as small suppliers and manufacturers often outsource tasks like inventory management, shipping etc to them. Josh Miller, VP of business development at CTL Global Inc, says, 'The (supplier) gets the audience, the retailer gets the sales. Drop shipping accounts for about 20% of CTL's revenue, compared with 5% five years ago.' The downside of drop shipping is that retailer has to give control of inventory management, shipping etc to third parties, while in case of wrong orders retailers are still on the hook. Nikki Baird of Retail Systems Research LLC, that conducted the survey for SPS, says, 'It's a big trust issue. Heavy, bulky things are better to ship from the supplier. But the problem is that the retailer then doesn't have control or visibility as to how that process is going.' Moreover, retailers also run the risk of turning suppliers into rivals by sharing customer data. Moreover, number of manufacturers are themselves turning to ecommerce to sell directly to customers. Following are some expert comments on the dynamics of online retail - (1) Irv Grossman, EVP at Chainalytics: 'Retailers are looking at Amazon and saying I may miss an opportunity. They're concerned about market share.' (2) Cathy Morrow Roberson, head analyst at Logistics Trends & Insights LLC: 'Managing capacity as drop-ship orders ebb and flow could pose a challenge for logistics companies.' (3) Frank Layo, retail strategist at Kurt Salmon: 'The practice (drop shipping) also costs more than buying items wholesale, because logistics and delivery get baked into the price.' Read on...

The Wall Street Journal: 'Drop Shipping' Looks Set to Go Mainstream as More Retailers Get on Board
Author: Jennifer Smith

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