Online retailers: Drop shipping vs. shipping from warehouse

by | Jun 6, 2013

Many businesses use multiple fulfillment models to run their online stores. The two most common are the Direct-to-Consumer model, a.k.a. drop shipping, and the traditional shipping from warehouse model. With the continued growth in e-commerce and greater customer expectations of delivery speed and accuracy, retailers are facing new challenges in managing their fulfillment models. In order to help you determine what’s best for your company, here’s a short description of each model along with their pros and cons.

Drop shipping

Mastering an “inventory-less” environment and collaborating more with trading partners with drop shipping is vital for e-commerce. Suppliers must ship directly to consumers without confusion, creating branded packing slips that maintain a retailer’s identity without an added step in the delivery process. Retailers benefit by having more products available through their e-business site, while increasing customer satisfaction—all without having to hold additional inventory that cost time and money.

Pros:

  • “Inventory-less” environment
  • Minimal financial investments
  • Endless aisle

Cons:

  • Little control of shipping
  • Lack of consistency in packaging labels
  • No visibility into the supply chain flow

Shipping from warehouse

Again, from bulk orders to cross-dock shipments marked for store and beyond, streamlining your supply chain and improving productivity with ship to warehouse is a must. If you ship to hundreds or thousands of vendors, you must achieve a new level of compliance, have shipments fulfilled accurately and provide visibility to individual orders.

Pros:

  • Buying in bulk
  • Insights into out-of-stock
  • Control in packaging labels
  • Visibility to supply chain flow

Cons:

  • Warehouse staffing
  • Forecasting and soring the correct amount of inventory
  • Financial investment in the warehouse

The demands of e-commerce are pushing more companies towards drop shipping, but shipping from warehouse remains a viable option. Visit the SPS Commerce website to learn more. In particular visit our case studies section to discover how other business owners have proactively managed and automated each of these fulfillment models through SPS Commerce’s industry-leading solutions.

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Want to get started with drop shipping?

Want to get started with drop shipping?

Learn about drop shipping benefits, fulfillment options and which electronic data transactions make it work.

Scott Bolduc

Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

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