A Wider Selection Online

In today’s retail world, it is common to see retailers promote products that are not stocked in their stores.  “If you don’t see what you want in our store, check out our website for more products” is a common advertising slogan.

Drop Shipping

When a company sells products off of their website that they do not carry in their stores, it is usually done through a method called Drop Shipping.  Drop shipping is the process where a third party ships the order directly to the end user on behalf of the ecommerce platform.  Generally speaking, companies do not stock anything in their own warehouse that they do not carry in the stores.

Drop shipped products can come from a couple of different locations.  One place is the manufacturer’s own warehouse, especially in large ticket and large item products.  Most manufacturers these days have agreements with their dealers that they will ship to the end user on their behalf.

Master Distributors as a Source

Another place products can come from is a Master Distributor.  Master distributors carry inventory in their own warehouses.  They have an EDI connection with their retailers.  Through the EDI feed, the online seller has access to information they need to sell products they do not physically stock themselves.  Some of the information they see includes:

  • Inventory on-hand
  • Inbound inventory
  • Warehouse locations
  • Real-time order status
  • Product cost
  • Shipping costs
  • Product sales and marketing content

The master distributor makes this information to all of their retailers.  Through this process, a product can appear by virtually countless numbers of online retailers overnight.

How Virtual Feed Works

A master distributor feeds the information electronically to the retailers.  The retailers take that information and place it on their website.  There is an electronic exchange sometime during off-hours, usually in the middle of the night.  At that time, the retailers update their product selection, costs, and availability.  This process is invisible to the customer. 

Ordering the Product

When an end user orders a product from the retailer, the retailer collects the payment directly.  The cost of shipping is instantly done and calculated into the price.  The order then is electronically transmitted automatically in real time to the master distributor.  Payment for the product is then transmitted to the master distributor from the seller.  There are many ways a retailer can pay the distributor including:

  • Credit card – Smaller resellers may have a credit card on file.
  • EDI bank feed – Payment comes directly from a bank on behalf of the retailer. 
  • Line of credit- Large retailers have a line of credit with the distributor.

Pick, Pack, And Ship

The drop shipper handles all of the shipping process directly to the end user.  The retailer is not involved in this at all.  The shipper has a program that prints a packing slip and shipping label with the name of the retailer on it. 

When the customer receives the product, all of the documentation indicates that product came from the retailer, and not a third party.  This makes the process invisible and seamless to the end user customer.

The Backbone of eCommerce

The Virtual Feed, Direct Fulfillment process is relatively new.  It started appearing in the late 1990s.  With it, anyone who can build an ecommerce platform and obtain a credit line, the opportunity to make a living through online sales, and offer products on their site that they don’t carry in their own warehouse.  It has spread internationally, which offers ecommerce platforms and manufacturers the opportunity to enter global markets.

Perry Goldstein
Perry Goldstein

Perry Goldstein is an electronics industry veteran, with over 40 years of experience in manufacturer sales and marketing in both the consumer electronics and Pro A/V spaces. He has managed sales in both B2B and B2C markets.