Drop shipping is an increasingly popular order fulfillment strategy for both retail and warehouse/distribution centers wherein retailers don’t actually keep products in inventory, instead relying on wholesalers and manufacturers to ship orders directly to customers.

As you can imagine, this approach has a number of different advantages and disadvantages for both retailers and distributors depending on their circumstances. If you’re considering using drop shopping for some or all of your products, or just want to know more about the process, here’s a few pros and cons you’ll want to consider:

ADVANTAGES OF DROP SHIPPING

• At the retail level, drop shipping allows you to explore a more broad product line than you might be able to otherwise. Particularly for online storefronts, using drop shipping means you can source items from different vendors and distributors to offer your customers more options than you could if you were tied to one distribution center or one storefronts’ worth of products.
• Another big advantage for both retailers and warehousing is a smaller space requirement. Offering drop shipping from a number of different facilities means retailers can free up more space on retail merchandise displays for other items without crowding out your current inventory. And for warehouses and distribution facilities, the need to only stock specific items and ship items directly out of their stock also contributes to more space on wire shelving and warehouse storage by providing a more quickly-moving product selection.
• Lastly, the potential is always there to reduce upfront costs with drop shipping. A “virtual inventory” can reduce a lot of upfront costs & price commitments in regards to inventory-carrying costs, minimum product purchases, and other expenses related to inventory stocking and maintenance.

DISADVANTAGES OF DROP SHIPPING

• One of the most immediate drawbacks to drop shipping is increased difficulty with processing orders. Above and beyond the usual customer service and processing issues with one storefront or distribution center, you now have to coordinate several different distribution channels and different customer service dilemmas to fulfill any given order or customer request.
• While the low barrier to entry for drop shipping is an attractive option, it’s important to remember you’ll be be dealing with other stores selling the same products. Any store or distribution center that offers drop shipping is going to offer it to everyone they can, so you’ll be more hard pressed to offer a unique product line if you rely too heavily on drop shipping.
• Lastly, while drop shipping might offer a lot of immediate benefits, you’ll need to be careful with higher fulfillment costs. Many stores that rely on drop shipping also have to pay for the stocking and shipping costs of these products from their distribution centers, and while these costs can go down over time you’ll have to pay more money overall for order fulfillment than you would if you stocked the items yourself.