What is Drop Shipping and What Does It Mean for You?

Odds are, when you shop at your favorite online stores, you're probably not thinking about where your items are coming from. Recently, more retailers are starting to use drop shipping — meaning they're giving up control of some customers' orders.

This fulfillment method allows retailers to offer more products on their websites, but many of those items ship directly from the supplier (instead of the retailer itself). Unfortunately, this can lead to less reliable shipping and higher costs for customers.

More Inventory (at a Cost)

Macy's and Home Depot are just two retailers who jumped aboard the drop shipping train early. This allows retailers like them to offer more items online, but without the need to actually keep them on hand in a warehouse. Instead, the suppliers, who would normally ship the products to the retailer to be sold, keep the inventory. When a customer orders something, it ships directly from the supplier instead.

It's an arrangement that could make things more efficient for retailers, and many are making a move to employ this shipping method in 2017, including Pier 1 Imports and Shoe Carnival.

Sadly, a big problem with this fulfillment method is that products can actually end up being more expensive. Retailers can offer something like a sweater in more colors, but doing so means they pay more for the products overall, due to more complicated logistics. That cost then ends up getting passed on to the customer. More choices are great, but customers end up paying more just for access to that bigger selection.

Possible Customer Service Headaches

While a retailer might have excellent customer service, that doesn't mean the supplier does. In order to utilize drop shipping, "retailers must hand control over key parts of their supply chains to third parties, including inventory management and shipping." Orders will come straight from the supplier, but the shipping and tracking info tends to come from the retailer.

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Of course, when something goes wrong, customers are more likely to contact the retailer first. Nikki Baird, the managing partner at Retail Systems Research, LLC, claims that it boils down to "a big trust issue" for retailers. Handing over the reins to a third party means "the retailer then doesn't have control or visibility as to how that process is going." It's easy to see how a setup like this could mean that any problems with your order may take even longer to resolve.

Update: As reader PapaT pointed out on our Jet.com article, third-party shipping headaches can get truly ridiculous: "I bought two toilets and only received the tank on each. Well, Jet was just a middle man and the process to get a refund took weeks."

The reader had to ship the product back to the supplier via FedEx, but the supplier refused to accept the delivery. "In the end, I went through four customer service reps and had to watch the FedEx tracker and call the final rep when the toilets were in the city the [supplier] was located. Then the Jet rep contacted the [supplier] to tell them to accept the toilets." Because of all this trouble, the reader says they'll probably never shop Jet again.

Readers, is it worth it to you to have more choices at your favorite online stores, even if it means less reliable shipping and higher costs? Let us know in the comments below!