Once, back in the 1970s, I built an information system for a glove retailer. This small company imported work gloves from the Far East. Primarily, it put the company's own label on the gloves and sold them to manufacturing companies in the United States. The glove retailer inventoried small quantities of all products in-house, and filled small orders directly from that inventory. Large orders were handled through "drop shipments". The order was accepted from the customer but instead of filling the order from in-house inventory, shipping labels and documents were made up and sent with an order to one of the glove manufacturers out of the country. That glove manufacturer would fill the order, apply the glove retailer's shipping labels, include the glove retailer's shipping documents, and then ship the packaged glove order directly to the end customer.

Drop shipping was a business arrangement where the glove retailer sold the goods of the glove manuafacturer, but never took possession or handled those good physically. However, the identity of the actual company shipping the gloves was never divulged to the customer, out of fear that the customer would do business directly with the glove manufacturer, cutting the glove retailer out of future transactions.

The Internet and e-commerce have extended and expanded the idea of drop shipping in several ways. Amazon.com has an operation similar to that of the glove retailer I described above, but in books instead of gloves. Amazon inventories many books, but also has cooperative arrangements with other book sellers in which Amazon lists their books on its system, sells those books, and collects payment for them, but the books are physically shipped from the other cooperating booksellers. In the case of used books, Amazon offers all of the possible source booksellers for a given book, and shows their respective prices. Amazon does the advertising and accounting and selling for those cooperating booksellers, and the company collects a commission for this service. This is drop shipping--but there is no effort to pretend that the book is shipped from Amazon's inventory. The identity of the actual bookseller shipping the book is not hidden.

Ebay inventories nothing. Ebay provides an online selling website and collects payment, but the customer has no illusion that the essential element of the transaction, delivering the goods, is carried out by Ebay rather than by the auction sellers. A major part of the Ebay system is the provision of a rating and feedback system on auction sellers. With Ebay, the relationship with the seller is totally transparent. In fact, Ebay distances itself from the quality of the transaction between buyer and seller.

Drop shipping has come a long way from my glove retail system--with much benefit for all involved, I think.