Drop Shipment

A drop shipment is an arrangement where a supplier delivers goods directly to your end customer without the goods passing through your premises first. You place the order with the supplier, the supplier ships to the customer's address, and you invoice the customer at your sell price. The physical product never touches your hands - but the commercial relationship remains entirely yours.

This model is used widely across promotional merchandise, office furniture, and lighting supply. A distributor routes branded goods from a decorator direct to a corporate client's office. A furniture dealer ships from the manufacturer's warehouse to a site address. The operational logic is the same: eliminate the middle leg to reduce handling time and cost.

What to Get Right on a Drop Ship PO

The purchase order must carry the customer's delivery address, not your warehouse. It should also specify packaging requirements - whether goods arrive in plain packaging, with your company name on the packing slip rather than the supplier's, and any site access or labeling instructions. Getting this on the PO before dispatch avoids problems that can't be fixed after the van has left.

You invoice the customer at your sell price; the supplier invoices you at cost. Your margin sits in the difference. Because the customer never sees the supplier invoice, confirm in writing that the supplier's documentation will not disclose their pricing.

The Key Risk to Manage

You lose the opportunity to inspect goods before they reach your customer. A colour match that's off, a wrong finish code, or a short delivery - you find out when the customer does. Agree the process for handling defects and returns with any drop ship supplier before the first order, not after.