“Dropship is more of a trend this year. People aren’t always going shopping in stores any more, so you need to entice your customers to come to your website and [offer a] product assortment because that’s important, and how do you support that?”

For the e-tailer, that means not having to keep high levels of inventory on the premises. Dropship enables them to get sales without having to make any capital investments in inventory, says Bolduc. Another advantage is the e-tailer can offer a wider range of products to their customers that might be complementary to items commonly ordered, but that can be shipped directly from the factory or vendor, he says.

There are a number of steps involved in building out an infrastructure to support dropshipping, says Bolduc. The first is to find out if the e-tailer has suppliers who are able to do that direct-to-consumer ship model and can support their branding experience. Then there is the order processing side; if the e-tailer wants to expand the assortment of their products, they need to get information about the products onto their website, such as product details, images and selling features.

“Then perhaps, getting data feed on what inventory is available,” would be the next step, Bolduc says. “When you start to relieve inventory to a supplier you want them to share what they have” so getting the selling process in place” is critical. E-tailers also need to find out if the vendor is able to handle the drop ordering side--can they get the orders out and acknowledge they can ship when they say they’ll ship? It’s also important to know if the vendor will share that information with the e-retailer, so that the latter can email to their customer with a product status. Another question to ask is whether the vendor can provide the e-tailer’s branding experience and share the shipping confirmation information, so the e-tailer can in turn communicate to the customer when they can expect shipment. Then the vendor would invoice the e-tailer.

For the e-tailer, if they haven’t already got a way to take in data, there are likely infrastructure needs that have to be built for that to happen, Bolduc notes, such as adding in new EDI documents. “If they have an EDI department, they can add a new set of EDI documents; [but] they need to map that so they can integrate it in,’’ he says. If the e-tailer doesn’t already have that capability, he says there are service providers that provide data feeds. Bolduc also notes that the data feeds don’t have to be in an EDI format; it can be in whatever format the e-tailer wants to use, such as XML or an ERP data feed from SAP or Oracle.

“So on the selling side, you have to manage how the product is on or isn’t on your website and the data feeds from the vendor around new goods and images … The more products you have obviously the more painful that is.”

If an e-tailer has EDI in place and has already built it out, the cost for the data flow can range from 10 cents per document up to $1, he says, depending on the number of documents and vendors, and how many data feeds are coming in and out. Bolduc says the SaaS model for data feeds runs from $2,500 to $5,000 a month.

If retailers are selling from their websites but are not trying to manage their costs, sales are going to be a struggle, he says. They need to figure out what the cost is to have inventory, he says. “Retailers will have some products stored in their warehouse that are common movers, but they expand by working with vendors when they analyze the buying habits of their customer.”

For example, a retailer needs to track the selling mechanism generated by customer—are they buying from a catalog, store or online? “If they start to see 800 customers bought one item that’s been dropshipped and that trend’s been growing in the past couple of months, that’s a conversation you want to have with a vendor.” The vendors are being forced to support dropshipping, he says, because it’s what retailers are moving to: hosting no inventory and having vendors supply it instead.

There is a flip side to doing dropshipping, however. The retailer might realize by analyzing purchases online that a product might be moving more than they thought and that they can fulfill and ship quicker than their vendor, Bolduc says, because they lose a day or two with the handoff. Then the e-tailer may decide a particular item might not warrant being housed offsite and move it back in-house, so they become owner of the inventory.

After all, says Bolduc, “We consumers want instant gratification.”