Drop Shipping Remains a Big Opportunity for Merchants

Apr 16, 2013 5:54 PM  By

The percentage of merchants who drop ship merchandise to customers has dropped slightly, but the percentage of merchandise they drop ship has risen, according to the results of Multichannel Merchant’s MCM Outlook 2013 survey.

According to the 2013 results, 54.3% of respondents said they drop ship an average of 17.66% of its merchandise. Last year, 61.7% of respondents said they drop shipped an average of 12% of its merchandise.

“Drop shipping makes great business sense as it is an effective way for companies to meet customer demand for relevant products that are not practical for one reason or another to stock within inventory,” said shipping consultant Mike Elder. “These reasons could include inventory carrying costs, amount of warehouse space required, or sporadic demand.”

For example, Elder said, if you are selling oldies music CDs, you may not want to incur the cost to own and store the “Carpenters Greats Hits,” but you want to be able to satisfy customer order for the CD.  Drop ship allows the merchant to offer a wider product assortment to better satisfy your customers.

Elder said the amount of drop shipment activity shown in the MCM Outlook 2013 results is reasonable for the participants queried.  But what the survey probably doesn’t show is drop ship activity that comes from companies that don’t own or fulfill most, if not all, of their orders. These companies use only drop-ship sell product via an ecommerce site.

“The survey shows less than 5% of the companies drop ship 90% or more of their product,” Elder said. “The amount of drop-shipping represented by such companies is most likely not surveyed because they don’t necessarily have operations and fulfillment staff in their companies.”

The MCM Outlook 2013 survey was fielded by Multichannel Merchant from Mar. 5 through Mar. 18, and included 1,110 respondents. Of those respondents, 430 identified themselves as operations and/or fulfillment professionals.

The MCM Outlook 2013 report on Operations and Fulfillment is available for download here.

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