The Role of Drop Shipping in E-Commerce - A Case Study of a Swedish IT & Consumer Electronics E-Tailer

Abstract

In line with the technology development electronic retailers (e-tailers) are experiencing extensive pressure on delivering products and services more rapidly than before. In turn, substantial pressure is placed on providing efficient e-fulfilment, which is also considered to be the most complex task of an e-tailer. To improve the order fulfilment efficiency, e-tailers commonly transfer the order fulfilment to another actor. This may be performed by outsourcing the warehouse to a third-party logistics provider (3PL) or by drop shipping, where the distributor ships individual orders directly to customers. Albeit drop shipping’s recognition among e-tailers, there is no consensus whether drop shipping could be directly related to outsourcing. The report undertakes a qualitative research approach with a case study at Dustin, a leading IT and consumer electronics e-tailer (CEE) in Sweden. The purpose of this study is to examine if a potential relationship exists among drop shipping and outsourcing. Thus, contribute to the research within outsourced order fulfilment strategies in the IT and consumer electronics sector. The empirical results have been gathered through interviews and observations at Dustin’s central warehouse. The findings indicate that drop shipping and outsourcing have similar characteristics and are used to accomplish equivalent outcomes. However, it is uncertain to what extent drop shipping and outsourcing management are interrelated. Due to the specific business characteristics of a CEE, drop shipping could be difficult to apply as a sole order fulfilment method. Therefore, a dual strategy where drop shipping is used as an extension to the own warehouse could be ideal for a CEE.