The practice, known as drop shipping, allows retailers offer more products for sale on their websites - such as multiple colours of the same item of clothing - doing away with the need to keep those items in stock. Instead, merchandise is shipped directly from the supplier's warehouse.
Drop shipping could prove a boon for logistics companies, which are often called on by small suppliers and manufacturers to take on inventory management, shipping and other tasks formerly handled by retailers.
In a retail industry survey by supply-chain software vendor SPS Commerce, 40 per cent of respondents said they expect more drop-ship vendors in 2017.
The survey also found that half of the logistics firms polled predicted that drop shipping would account for more than a quarter of their sales within the next three years, reported the Wall Street Journal.
Early drop shipping adopters include Macy's and Home Depot, which have used the practice to broaden their online assortments and sell bulky items, such as appliances that take up large amounts of space in stores and warehouses.
The downside: Retailers must hand control over key parts of their supply chains to third parties, including inventory management and shipping. But they are usually still on the hook with customers when an order goes wrong because emails that track an online order's shipping progress and packing slips typically appear to come from the retailer."It's a big trust issue," said managing partner Nikki Baird at research firm Retail Systems Research LLC, which conducted the survey for SPS. "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."
Many traditional retailers are willing to take those risks as more people shop online. Spending at e-commerce retailers rose 11 per cent year on year in 2016, but dropped by six per cent at department stores, according to advance estimates of US retail sales from the Commerce Department.
Managing capacity as drop-ship orders ebb and flow could pose a challenge for logistics companies. For example, shipping companies might have to lease trucks to maintain capacity, said head analyst Cathy Morrow Roberson at market research firm Logistics Trends & Insights LLC.
Returns may complicate matters, if unwanted items shipped from vendors end up stranded at stores or retailer-run warehouses.
Drop shipping could prove a boon for logistics companies, which are often called on by small suppliers and manufacturers to take on inventory management, shipping and other tasks formerly handled by retailers.
In a retail industry survey by supply-chain software vendor SPS Commerce, 40 per cent of respondents said they expect more drop-ship vendors in 2017.
The survey also found that half of the logistics firms polled predicted that drop shipping would account for more than a quarter of their sales within the next three years, reported the Wall Street Journal.
Early drop shipping adopters include Macy's and Home Depot, which have used the practice to broaden their online assortments and sell bulky items, such as appliances that take up large amounts of space in stores and warehouses.
The downside: Retailers must hand control over key parts of their supply chains to third parties, including inventory management and shipping. But they are usually still on the hook with customers when an order goes wrong because emails that track an online order's shipping progress and packing slips typically appear to come from the retailer."It's a big trust issue," said managing partner Nikki Baird at research firm Retail Systems Research LLC, which conducted the survey for SPS. "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."
Many traditional retailers are willing to take those risks as more people shop online. Spending at e-commerce retailers rose 11 per cent year on year in 2016, but dropped by six per cent at department stores, according to advance estimates of US retail sales from the Commerce Department.
Managing capacity as drop-ship orders ebb and flow could pose a challenge for logistics companies. For example, shipping companies might have to lease trucks to maintain capacity, said head analyst Cathy Morrow Roberson at market research firm Logistics Trends & Insights LLC.
Returns may complicate matters, if unwanted items shipped from vendors end up stranded at stores or retailer-run warehouses.