As retailers face rising costs, growing competition and changing customer expectations, many are turning to dropshipping in a bid to expand product ranges without increasing inventory risk.
According to Rithum’s retail director EMEA Mark Howell, the model is becoming an increasingly important part of modern retail strategy, allowing businesses to widen their assortment while saving on cash and warehouse capacity.
Retail Gazette caught up with Howell, who says the fundamental attraction of dropshipping is simple: retailers only pay for stock once it has been shipped by a supplier.
“The virtue and advantage of doing a model like dropship is you only pay for it when it’s shipped by the brand,” he explains.
For retailers faced with constraints such as warehouse capacity, store space and inventory budgets, dropshipping allows them to still provide for customers without ‘committing significant capital upfront’.
“Retailers want to solve a problem,” Howell says. “They want to be relevant for customers. They want to have choice and assortment.”
The approach has become particularly attractive as retailers seek to compete with ecommerce giants such as Amazon, where a significant proportion of products are supplied and fulfilled by third-party sellers operating from warehouses Amazon itself does not own.
“Mimicry is the highest form of flattery,” Howell says. “If it works, why aren’t I doing it?”
What does dropshipping actually change?
While dropshipping is often discussed as a commercial strategy, Howell argues the biggest shift happens operationally.
Instead of goods moving through a retailer’s own distribution network, suppliers become responsible for fulfilment and delivery. The retailer, however, remains accountable for customer experience.
“The physical movement of the goods is managed by a supplier,” he says. However, what does not change are customer expectations.
“Is it being delivered on time? Is the experience good for customers? Is it packaged well? Is it turning up in one piece? All of those things are still true.”
This, Howell says, creates one of the biggest challenges for retailers adopting the model: learning how to relinquish some control without losing visibility.
Many businesses, Howell says, still operate around wholesale processes built over decades. Buyers and merchandisers remain accustomed to approving every SKU, product description and item before it reaches customers.
One of the common mistakes is attempting to replicate those same wholesale processes within a dropship environment.
“If you try and replicate your wholesale processes just into dropship, then you will suffer. You will fail because you’ll still be slow.”
Instead, retailers need to adopt a “trial and learn” mindset, using supplier inventory to test new products and categories before making larger commitments.
The model can also help retailers free up warehouse capacity by moving slower-selling lines out of their own fulfilment networks while continuing to offer them online.
Trust and data become the new battlegrounds
Howell believes that as retailers move away from inventory-led expansion, trust becomes the defining competitive advantage.
“We shop with retailers that we get a good experience with,” he says. For that reason, supplier performance cannot be left to chance.
Retailers typically establish strict operational playbooks, service-level agreements (SLAs) and key performance indicators (KPIs) for participating suppliers. Failure to meet those standards can result in financial penalties or removal from the programme.
“If you don’t do what customers expect, you’ll erode trust,” Howell says. He points to Marks & Spencer as an example of a retailer that established clear expectations from the outset when building its programme.
Alongside trust, product data is becoming increasingly important as consumers change how they discover products online.
Howell says retailers are now navigating a world where search is becoming more conversational, driven by platforms such as ChatGPT, Gemini and other AI-powered tools.
“It’s not just enough to say it’s a laptop with 16GB of memory and a certain screen size,” he explains.
If consumers search for a lightweight laptop with a high-quality display, or a breathable hiking backpack suitable for long walks, retailers need product attributes that reflect those needs.
“If that information isn’t there, the AI engine isn’t going to find it.” The challenge is compounded by the fact that many retailers are still working to improve the quality of legacy product data already sitting across their websites.
Learning from past failures
While dropshipping and marketplace models have become commonplace in the US, Howell believes the UK market has historically struggled to achieve the same level of success.
Part of the reason, he argues, is that many retailers attempted to bolt dropship programmes onto existing wholesale systems rather than redesigning processes around the new model.
“UK retailers were trying to make these quite big ideas work, but they were still being bound to the legacy of old wholesale processes.”
By contrast, retailers that have succeeded have invested in new fulfilment models while remaining realistic about the limitations of older technology infrastructure.
“It’s about finding the best path with what you have,” Howell says. The growing maturity of the sector is also helping. More retailers have now seen successful examples in the market, while specialist technology providers and industry professionals bring greater experience than was available a decade ago.
Howell points to Next as an example of a retailer that has successfully modernised its fulfilment approach. While the retailer still has deep roots in traditional wholesale operations, it has developed new fulfilment models and moved beyond some of the limitations of legacy processes.
He also highlights Marks & Spencer’s approach, praising the retailer for having a clear vision of what it wanted its dropship programme to achieve and for setting clear expectations for suppliers from the outset.
Howell says retailers such as M&S, Adidas and Pets at Home may use different commercial models and operate in different sectors, but all face the same challenge of balancing customer experience, supplier relationships and operational efficiency as they expand their assortments beyond inventory held in their own warehouses.
At the same time, retailers are facing new pressures ranging from rising fuel costs and geopolitical disruption to changing regulation around artificial intelligence.
Howell highlights the forthcoming requirements under the EU AI Act, which will introduce new transparency obligations around AI-generated content and product information.
He also points to the future development of Digital Product Passports, which are expected to require significantly greater product-level data and traceability across supply chains.
While the final shape of those regulations is still evolving, Howell believes retailers will increasingly require suppliers to provide the necessary information as a condition of participation.
“The retailer is still heavily liable due to our laws and legislation in the UK.”
For retailers balancing growth ambitions with mounting operational complexity, the challenge is no longer simply expanding assortment. It is doing so while maintaining trust, visibility and compliance.
As customer discovery shifts towards AI-driven search and product recommendations, retailers may find that the quality of their product data matters just as much as the size of their catalogue.
The retailers that succeed will not necessarily be those holding the most stock, but those that can connect customers to the right products, at the right time, through the right fulfilment model.
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