Drop Ship

The process by which a supplier ships good directly to the buyer, physically skipping the warehouse of a distributor, BUT from an accounting standpoint, treating the goods as if they had been processed through the distributor's warehouse, which allows a distributor to earn its normal mark-up commissions (in some markets as much as 50-60%) and not be treated as a manufacturer's representative whose commission rates are much lower (1-10% typical). With just-in-time inventory methods (supply chain) and the obvious shipping cost savings (goods are shipped directly to the purchaser, skipping the distributor's warehouse and a second delivery), this method is becoming quite popular. The downside risks, though, are worthy of considering given that drop shipping exposes the end-customer's full contact information and buying history to the supplier and call a distributor's margins into question.