Consider this scenario: You establish a website and advertise products on it. When customers send in orders, you forward them to your wholesaler or distributor, who ships the orders directly to customers’ homes with your company’s label on them. You completely avoid the enormous costs and risks involved in inventory, warehousing, and fulfillment. Too good to be true? That depends, says a new paper by Wharton professor Serguei Netessine and two colleagues that looks at the pros and cons of drop shipping, which the authors also refer to as virtual order fulfillment.
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