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Drop-shipping as a business model; The degree of acceptance from a supplier’s perspective.

Darian Nooitgedagt

Master of Science (MSc) Business Administration

Small Business & Entrepreneurship

Faculty of Economics and Business

University of Groningen

Thesis supervisor – dr. E.P.M. Croonen

Second assessor – dr. M. Wyrwich

Vlasstraat 11A

9712KS Groningen +31 6 36 48 23 52

darian.nooitgedagt@home.nl Student Number 2767961

8 March 2021

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Abstract

This qualitative research examines the drop-shipping business model from a supplier’s perspective.

The technology acceptance model is used to obtain knowledge about the supplier’s motivations on

why they participate in the drop-shipping business model and what factors have an influence on these

motivations. This is done on the basis of exploratory interviews. In-depth interviews were held with

six suppliers participating in the drop-shipping business model. The first motivation given by the

suppliers is that they were faced with a rising demand for drop-shipping from the market. The second

motivation is that drop-shipping is relatively easy to implement in their business operations. Other

motivations: drop-shipping serves as an extra service, a source of revenue and as a means of growth.

Factors influencing these motivations can be distinguished by beneficial and adverse factors. Factors

that have a beneficial influence on the supplier’s decision to participate in the drop-shipping business

model are: that it enlarges the reach of their products and that it enables the creation of brand

awareness. Factors considered to have an adverse influence are: drop-shipping is labor intensive, that

the performance and entrepreneurial qualities of the drop-shippers can be disappointing and growing

through drop-shipping is considered to be hard. At last, the factor which includes software and

automation of processes is considered to be beneficial as well as adverse, depending on the situation.

Keywords: drop-shipping, supplier’s perspective, Technology Acceptance Model (TAM),

motivations and factors.

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Table of contents

1. Introduction ………………………………………………………………………….. 4

2. Theoretical Background …………………………………………………………… 6

2.1 Drop-shipping as a business model …………………………………………….. 6

2.2 The Technology Acceptance Model …………………………………………….. 7

2.3 The Technology Acceptance Model most suitable for Drop-shipping …………. 9

3. Research Methodology ……………………………………………………………… 11

3.1 Data collection ………………………………………………………………….. 11

3.2 Data analysis ……………………………………………………………………. 12

3.3 Reliability and Validity …………………………………………………………. 14

3.3.1 Reliability ………………………………………………………………….. 14

3.3.2 Validity ……………………………………………………………………. 14

4. Results ………………………………………………………………………………. 15

4.1 Participating supplier’s profile …………………………………………………. 15

4.2 A supplier’s perspective: the perceived usefulness of drop-shipping …………. 18

4.3 A supplier’s perspective: the perceived ease of use of drop-shipping …………. 21

4.4 The motivations and the factors influencing the supplier’s

perceived usefulness and perceived ease of use ………………………………... 24

5. Discussion and Conclusion ………………………………………………………… 28

5.1 Conclusion ……………………………………………………………………… 28

5.2 Theoretical implications ………………………………………………………... 29

5.3 Managerial implications ………………………………………………………... 30

5.4 Limitations and directions for future research ………………………………….. 30

References ……………………………………………………………………………….. 31

Appendix A: The interview guideline …………………………………………………. 33

Appendix B: Revised 6 items scale perceived usefulness …………………………….. 34

Appendix C: Revised 6 items scale perceived ease of use ……………………………. 34

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1. Introduction The outbreak of the COVID-19 virus resulted in struggling offline businesses, while in general the

internet-based businesses are thriving (Dontu and Gustafsson, 2020). Online shopping now becomes the

core, while the existing habit of offline shopping becomes the peripheral (Sheth, 2020). According to

Sheth (2020) people are embracing digital technology during the Covid-19 panademic, which is likely

to modify our existing habits of offline shopping into more online oriented shopping.

However, prior to the Covid-19 outbreak, advances in digital technologies, comprising information,

computing, communication and connectivity, have already led to new opportunities for business model

innovation (Remane, Hanelt, Nickerson and Kolbe, 2017). According to Remane et al. (2017) managers

of traditional sectors often struggle to understand innovation logic, which deviates fundamentally from

their previous knowledge. On the other hand, managers from IT companies successfully utilize these

technologies to form new global ecosystems. This results in new digital business models which change

the balance of power for instance in the retail sector (Remane, et al. 2017). In addition to new digital

business models every business irrespective of any sector feels the need to make their online presence,

so that brand awareness can increase and a large audience can be reached (Singh, Kaur and Singh, 2018).

Looking at E-commerce around the globe, up to the present day, there has been a constant growth

in terms of selling and buying goods and services. In this study E-commerce involves the buying and

selling of goods and services over the internet (Singh, et al. 2018). Singh et al. (2018) describe an

emerging field in E-commerce which is referred to as drop-shipping. They state that the drop-shipping

business model has emerged as a service designed to save warehousing and stockholding costs for online

retailers. Drop-shipping can be seen as a management strategy whereby the retailer, which is in fact the

drop-shipper, does not keep their offerings in stock but transfers the order and delivery details they

receive from customers to the manufacturer, or other suppliers, who then delivers straight to the

customer (Vellvé and Brugos, 2018). This business model, from the perspective of the drop-shipper, is

a low risk undertaking with small upfront investments (Witowski, Koralewska and Huk, 2020).

According to Kaluzhsky (2014) the economic crisis which started in 2008 became a stimulant for

the business model, with organizations trying to be more efficient and cost effective. Since then, the

drop-shipping business model is on a rise and has grown in a parallel to the e-commerce transactions.

With Vellvé and Burgos (2018) expecting the business model to become more specialized and continue

to grow. However, the empirical evidence found on the use as well as the success of drop-shipping is

limited. This because of the difficulty in identifying the type of e-commerce retailer which relies on

drop-shipping as a critical element of their business strategy (Vellvé and Brugos, 2018). Where multiple

studies claim that the business model is beneficial for the drop-shipping retailer in terms of storage costs,

upfront investments, logistics and warehousing (Chen, Chiu, Lin and Huang, 2018; Singh, et al., 2018;

Witowski, et al., 2020; Vellvé and Burgos, 2018; Kaluzhsky, 2014), no claims were made from the

supplier’s perspective in terms of benefits, usefulness, acceptance of the business model. This is

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surprising, because the business model is constantly growing (Vellvé and Burgos, 2018). Kamalapur

and Lyth (2020) state that further research on drop-shipping is needed to map a variety of different

parameters to expand the academic literature on the use of the business model. They suggest to further

study the supplier side of drop-shipping. No empirical evidence is found regarding the supplier side of

the business model in terms of the usefulness, benefits and acceptance. Also, Musa, Taib, Jabar and

Kahlid (2016) suggest further research on the adoption of the drop-shipping business model.

The goal of this study is to obtain knowledge in the degree of acceptance of drop-shipping among

suppliers and understand their underlying motives to participate in a drop-shipping business model. In

other words, what drives them to participate in a drop-shipping business model and what are factors that

influence this motive. Such an insight should also provide a practical contribution for retailers who are

looking for a collaboration with such a supplier by understanding their perspective and make good use

of that.

This insight is gained through an exploratory approach of the technology acceptance model (TAM).

Introduced by Fred Davis more than a quarter century ago, the TAM became a dominant model in

investigating factors affecting users’ acceptance of a technology (Marangunic and Granic, 2015). The

TAM presumes a role of two variables; perceived ease of use and perceived usefulness, in a relationship

with potential system usage (Marangunic and Granic, 2015). According to Fred Davis himself he

describes the TAM as a model which addresses why end-users accept or reject information systems. He

explains how user acceptance is affected by specifying the casual interrelationships between system

design features, perceived usefulness, perceived ease of use, attitude towards using it and actual usage

behavior (Davis, 1989). TAM is derived from the psychology-based theory of reasonable action (TRA)

and the theory of planned behavior (TPB). TAM has taken a leading role in explaining users’ behavior

towards technologies and information systems and is used as a widely applicable model (Marangunic

and Granic, 2015).

This leads to the following research question: What factors influence the degree of acceptance and what

are the underlying motivations of suppliers to participate in a drop-shipping business model?

The research question is answered on the basis of exploratory interviews. In-depth interviews were held

with multiple suppliers which participate in the drop-shipping business model.

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2. Theoretical Background

In this Chapter a deeper understanding of the drop-shipping business model is given, as well as the

technology acceptance model and how they are related.

2.1 Drop-shipping as a business model

The concept of drop-shipping was prevalent for many years. With the sudden rise of E-commerce

businesses, in which products and services are sold and bought over the internet, companies started

shifting to drop-shipping (Singh, et al. 2018). It has gained popularity as an order fulfillment policy and

business model for online retailers, spurring the rapid growth of online retail markets (Yu, Cheong and

Sun, 2017).

Drop-shipping happens when retailers send orders to their wholesalers who then ships the order

directly to the customer (Musa, et al. 2016). The retailer does not have a physical store or keep inventory.

Products are displayed on the company website, orders will be collected and transferred to the

wholesaler or supplier, who then is in charge of shipping the product directly to the consumer (Ma,

Jehai, Sahin, Dallery, 2017). To better understand the business model Kamalapur and Lyth (2020)

created Figure 1 stated below. Where in this figure E-tailer is referred to as the (online) retailer.

Figure 1: Drop-shipping supply chain

Drop-shipping around the world is mostly being associated, by the general public, with selling products

directly from platforms such as Aliexpress. This form of drop-shipping with long delivery times and

mostly poor product quality seems to go without any kind of collaboration between the retailer and

supplier. This type of drop-shipping is most commonly defined as ‘low-ticket drop-shipping’ and is not

a part of this research (Vellvé and Burgos, 2018). This research focuses on ‘high-ticket drop-shipping’

(Vellvé and Burgos, 2018). This is referred to as products manufactured and distributed within Europe,

which contain European quality marks such as the CE certificate.

From a retailer’s perspective drop-shipping is seen as a low risk undertaking. As mentioned, it does

not require the involvement of large financial resources upfront, having a storage space or employees

(Witowski, et al. 2020). It is a simple business model where retailers can do their e-commerce operations

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in a cost-effective way, taking responsibility for only the marketing, sales and customer service (most

often). For consumers it is in most cases not possible to order directly from the supplier, as they only

work on business-to-business level (Vellvé and Burgos, 2018). Witowski, et al. (2020) also state that

for the retailer it is easy to leave the market in case of failure. This implies advantages from the retailer’s

perspective; however, no empirical evidence is found on the perspective of the supplier.

Vellvé and Burgos (2018) imply that the supplier has the advantage to expand their distribution

capacity since it brings together a large number of online retailer stores selling their products. According

to them, this should result in economies of scale. However, their claim is not grounded with empirical

evidence and is based on ‘low-ticket drop-shipping’ with products from Asia. Furthermore, Yu, Cheong

and Sun (2017) state that drop-shipping can also be attractive for the supplier by enabling them to sell

products on the retailer’s website, that both the retailer as well as the manufacturer can benefit from the

arrangement. They do not substantiate this claim any further. The TAM is used to get a better

understanding of supplier advantages and their motivation to participate in the business model.

2.2 The Technology Acceptance Model

While the introduction of the TAM was in 1986, it continues to be the most widely applied theoretical

model in the field of technology and information systems according to Lee, Kozar and Larsen (2003)

and still Marangunic and Granic (2015) state that TAM has a leading role in explaining users’ behavior

toward technology and information systems. TAM started with Davis in 1985 who proposed that system

use is a response that can be explained or predicted by user motivation, which, in turn, is directly

influenced by an external stimulus consisting of the actual system’s features and capabilities (Chuttur,

2009). This resulted in the following conceptual model:

Figure 2: Conceptual model for the Technology Acceptance Model (Chuttur, 2009)

The system is what is referred to as the technology or information system, which is tested for its

acceptance (Marangunic and Granic, 2015). The system or technology used in this research is the drop-

shipping business model from a supplier’s perspective.

In 1986 Davis further developed the model, he suggested that users’ motivation to use a system is

explained by three factors: the perceived ease of use, the perceived usefulness and the attitude towards

using the system. In later studies the model further evolved, which resulted in the final version in 1996

(Figure 3) (Chuttur, 2009).

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Figure 3: Final version of the Technology Acceptance Model (Venkatesh and Davis, 1996; Chuttur, 2009)

Research in psychology and TAM itself suggest that the single best predicter of actual system usage is

‘the users’ intention to use’. The intention to use (Behavioral Intention, BI) is determined by one’s

attitude towards using a certain system or technology. This attitude towards using in turn is then

determined by two specific beliefs. This contains both the perceived usefulness (U) and the perceived

ease of use (EOU), as shown in Figure 3. The perceived usefulness is referred to as the user’s perception

of the degree to which using a particular system will improve their performance. The perceived ease of

use is the user’s perception of the extent to which using a particular system will be free of effort (Davis

and Venkatesh, 1996). The goal of this study is to obtain knowledge about the underlying motivations

of the suppliers to participate in a drop-shipping business model. According to Marangunic and Granic

(2015) the user’s motivation lies in front of the BI. The motivation is based upon U and EOU and

influences the Behavioral Intention (Venkatesh and Davis, 1996).

An additional change brought to the TAM model, is the consideration of other factors. Namely, the

external variables that might influence the beliefs of a person towards a system (Chuttur, 2009). This

means that the external variables have a direct influence on the perceived usefulness and perceived ease

of use. This results in an indirect influence of the external variables on the Behavioral Intention

(Marangunic and Granic, 2015). According to the studies of Chuttur (2009); Marangunic and Granic

(2015); Burton-Jones and Hubona (2006) those variables include system characteristics, user training,

user participation and the nature of the implementation process. They also mention personality traits,

demographic characteristics, prior usage and experience, confidence in the technology or system, output

quality, risk, trust, expectations, level of education and age (marangunic and Granic, 2015; Chuttur,

2009; Burton-Jones and Hubona, 2006; Davis and Venkatesh, 1996). These researchers found that those

external variables, in their research, indeed had a certain effect on the beliefs U and EOU. However,

considering multiple studies, the external variables seem to be chosen at random (Marangunic and

Granic,2015). Where Burton-Jones and Hubona (2006) quote: ‘Based on a detailed analysis of 22 TAM

articles from six journals, Legris et al. found that 60% of TAM studies considered external variables and

there was “no clear pattern with respect to the choice of the external variables considered.”.

TAM uses multiple-items scales to operationalize BI, U and EOU in order to have a more reliable

measurement than single item-scales. The Cronbach alpha of TAM scales has generally been found to

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exceed 0.9 across numerous of studies. TAM is seen as a very confident and reliable model (Davis and

Venkatesh, 1996). These scales were translated into open interview questions, which are used to get an

insight in the perceived usefulness and the perceived ease of use specific to the system. The scales are

discussed in more detail in Chapter 3.

2.3 The Technology Acceptance Model suitable for Drop-shipping

The research of Davis in 1989 was the first to conclude that both the Theory of Reasoned Action (TRA)

and TAM provide significant results to predict the intention of participants, to use a certain system

(Chuttur, 2009). However, TAM provides a much simpler method to implement, because the beliefs

variables (U and EOU) are context-independent. This indicates that the Perceived Usefulness and

Perceived ease of use can become clear on the basis of the scales, without requiring any specific

adjustments to adapt to a system. Whereas, in case of the TRA, it is necessary to develop a series of

salient beliefs, specific to the system used in the research, before formulating the scales for measuring

the beliefs (Chuttur, 2009). This indicates that the TAM and its scales are widely applicable without any

modifications beforehand. Where the scales of the TRA have to be set up by the researcher, specific to

the system being studied. These scales from the TAM are being discussed in the next Chapter.

The results of another experiment show that both the Theory of Planned Behavior (TPB) and TAM

were suitable to predict system usage. Where TPB is a more complex model which only considers beliefs

that are specific to the given system. This results in more accurate information that can be obtained, due

to the beliefs specific to the system. TAM instead, is a simpler model that can be generally applied to

any system, and thus provides broad information about the perceived ease of use and perceived

usefulness (Marangunic and Granic, 2015).

In this research TAM is considered to be the most suitable model. TAM should enable the possibility

to obtain knowledge about the underlying motivations of the suppliers, who participate in a drop-

shipping model. TAM is most suitable, because from a supplier perspective, the underlying motivations

is still an area which is unexplored. This results in the absence of available beliefs specific to the system.

In this research the system is referred to as the drop-shipping business model, with the suppliers

participating as the users of the system.

As opposed, when doing research about the underlying motivations of retailers TRA or TPB will be

a more suitable model to use. This is because, as previously indicated by Witowski et al. (2020), there

are already a set of specific beliefs available for the use of drop-shipping from a retailer’s perspective

(the system). Those specific beliefs are related to drop-shipping being beneficial for the retailer in terms

of (no) storage costs, upfront investments, logistics and warehousing (Chen, Chiu, Lin and Huang, 2018;

Singh, et al., 2018; Witowski, et al., 2020; Vellvé and Burgos, 2018; Kaluzhsky, 2014). Specific beliefs

like these are not available from a supplier’s perspective. So, with TAM being a model which can be

generally applied to any system and the underlying motivations of suppliers being an unexplored area.

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The TAM seems to be to most suitable model to obtain knowledge about the actual usage of the drop-

shipping business model.

Drop-shipping on one hand, as stated in this research, is seen as a business model. Where on the

other hand, for example Yu et al. (2017), classify drop-shipping as an information system. They

substantiate that by explaining that the retailer, who receives the order from the customer, never gets to

see or touch the product. So, in fact all the retailer does is sending information from the customer to the

supplier. This, from a retailers’ perspective, can be seen as an information system. Where a supplier

would categorize drop-shipping as a business model, as they have to transfer the products sold. This

strengthens the alignment between the TAM and drop-shipping being the system studied in the model.

Subsequent to that, this study potentially builds on the literature of the TAM. Most studies use the TAM

for specific technologies or information systems (Marangunic and Granic, 2015; Chuttur, 2009), where

it might be applicable to (new)(digital) business models, which expands the possibilities of TAM.

In this research we exclude the external variables of the TAM. The external variables mentioned in

Chapter 2.2 have proven to play a role on the effect of U and EOU (Chuttur, 2009). However, only 60%

of the studies regarding the TAM use external variables. Where, in most studies, these variables were

picked at random and no clear pattern was considered (Marangunic and Granic, 2015; Burton-Jones and

Hubona, 2006). Considering the research question of this study: “What factors influence the degree of

acceptance and what are the underlying motivations of suppliers to participate in a drop-shipping

business model?”. The underlying motivations (motives) are formed up by the perceived usefulness and

perceived ease of use. When a system is perceived as useful and relatively free of effort a motive is

formed on why a supplier should implement or reject a certain system. When drop-shipping is perceived

as not useful and requires a lot of effort, results in a motive on why they will reject a system. This motive

results in the supplier’s behavioral intention and actual usage of the drop-shipping business model. The

actual usage is not directly relevant as this research focusses on the factors and underlying motivations.

So, regarding the research question and the TAM, the following model has been conducted:

Figure 4: modified Technology Acceptance Model regarding the use of drop-shipping by suppliers

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The factors influencing the supplier to participate in a drop-shipping business model results from the

interviews that were held. These factors play a role in the perceived usefulness (U) and perceived ease

of use (EOU). The U and EOU then form the underlying motivations of the suppliers. The underlying

motivations, in this research, is referred to as the motive for the supplier to use the drop-shopping

business model. The underlying motivations or motive results in the behavioral intention of the supplier

to participate in a drop-shipping business model. All the participating suppliers in this research do drop-

shipping to some extent, this means that there has been a moment in time where the intention is formed

to start with drop-shipping. The aim of this study is to decode this behavioral intention back to the

motivations and factors that form the intention to participate in drop-shipping. In Chapter 4, the results

section, this model is refined with the results of the interviews.

3. Research Methodology This research aims to obtain an in-depth understanding of the underlying factors and motivations of

suppliers participating in a drop-shipping business model. The research is conducted via a qualitative

approach and the primary data has been collected through semi-structured interviews. A qualitative

approach has been carried out, because of the limited prior research that is relevant to the specific

research question. According to Miles and Huberman (1994) qualitative research is well suited for

understanding phenomena within their context, uncovering links among concepts and behaviors, and

generating and refining theory. It increases the understanding of complex phenomena due to the detailed

and in-depth information that it creates (Currall and Tower, 2002). This is most suitable to obtain

knowledge about the dimensions prior to the perceived usefulness and perceived ease of use and the

specific underlying motivations of suppliers.

3.1 Data collection

The main source of data collected for this research were the face-to-face interviews. In total 6 in-depth

interviews were held. These were conducted online due to the outbreak of the COVID-19 pandemic.

The interviews were held with business owners and managers from organizations, which were classified

as a supplier in a drop-shipping business model. The participating organizations have been collected by

means of a public list. This list contains multiple European and Netherlands based suppliers primarily

focusing on drop-shipping as a specific strategy in their organization. These criteria have been set to

assure the validity of the research (Leung, 2015). Desk research, regarding the respondents, has been

carried out prior to the interviews in order to verify their drop-shipping focus.

The interview is based on the topic-guide methodology of Kvale (1996). This methodology aims to

get extensive answers by posing short, nondirective questions. The interview is divided into four sections

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and each is introduced in a non-directive way to discover the perspectives of the interviewees. The

answers flowing from a non-directive start are seen as the most important factors in the perception of

the interviewee. Semi-structured interviews provide a stable structure while still leaving room for further

probing, if unexpected information or factors would emerge (Kvale, 1996). Dividing the interview in

these sections contributes to the consistency during the interviews. This results in standardization and

reliability of the data flowing from the interviews (Leung, 2015). The interview guideline can be found

in Appendix A. The first section consists of open questions regarding the organization, to get an insight

in their activities and business model. These are followed by questions on how they operated in the past

and questions on ‘why’ the operate as they do. Follow-up questions were used to obtain more

information.

As mentioned in Chapter 2, TAM is a multiple-items scale, which makes the model reliable

(Venkatesh and Davis, 1996). For both the perceived usefulness and perceived ease of use a 6 items

scale has been developed (Chuttur, 2009), which can be found in Appendix B and C. These scales where

then translated into open interview questions and contain Section 3 and 4 of the interview. This can be

found in Table 1. The goal of translating these scales into open questions, is to obtain qualitative

knowledge about the U and EOU dimension of the theoretical framework. The third section started with

the introduction of the term drop-shipping to gain an insight in the interviewees understanding and

awareness. Addressing both scales gives an in-depth understanding in both the perceived ease of use

and perceived usefulness of drop-shipping for the (user) supplier. This forms the underlying motivations

of the suppliers and leads to the Behavioral Intention to use a system (Marangunic and Granic, 2015).

The last section of the interview builds upon the questions regarding both scales and focus on the

motivation why they operate through drop-shipping. This section starts with the dependent variable,

what they think of the business model and why they use it. Follow-up questions linked to the perceived

usefulness and perceived ease of use are asked to obtain a deeper understanding.

3.2 Data analysis

The interviews were recorded after which they were transcribed. The method of Emans (2004) is used,

where the initial interview questions are based on the variables of the theoretical framework, without

any coding. The analysis started by reading through the transcripts in order to increase the understanding

of the data. Subsequently, the collected data has been proactively gone through with an objective lens

in order to identify, analyze and reporting patterns (Braun and Clark, 2006). The data was searched for

recurring patterns and other important insights (Braun and Clark, 2006). Analyzing the data is based on

the different parts of the theoretical framework. The interview guideline consisted of five different parts,

which together covered all the dimension of the theoretical framework. Tables are used to structure the

interview data of all interviewees. This helped to reveal patterns and draw conclusions in the analysis

(Miles and Hubermann, 1994). Overall, dividing the interview into different parts is as follows:

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Variables Interview Questions Measurement

The introduction A short introduction from both the interviewer as well as the

interviewee. However, this is not relevant for the data. No measurement

The Company Guideline/sample questions:

- Can you tell something about the company?

- How does the company operate and what does the business

model look like?

- Why is it that the company operates in this way?

- has the company always done business that way?

- If not, what has changed?

- and, why?

Are you aware of the term drop-shipping? Would you

describe the organizations’ business model that way? Why?

Qualitative

- open questions

Perceived Usefulness

(U)

Guideline/sample questions:

- Using drop-shipping in our business would enable us to

accomplish our tasks (operations) more quickly?

- Does the company performance change by using drop-

shipping?

- Does drop-shipping affect the effectiveness of the

operations?

- Does drop-shipping make it easier to do business?

- Do you find drop-shipping useful for the organization?

Qualitative

- open questions

Perceived Ease of Use

(EOU)

Guideline/sample questions:

- How would you describe the learning process in operating

through drop-shipping?

- Is it easy to operate via drop-shipping as the company

desires to? And why?

- Is operating via a drop-shipping business model

understandable and clear? (Why?)

- Do you find drop-shipping flexible to operate through?

- Is it easy for the company to grow through drop-shipping?

- Is drop-shipping an easy business model to work with?

(why?)

Qualitative

- open questions

Motivations and Factors - What is your view on the drop-shipping business model?

- Why did the company choose to operate through such a

business model?

- What factors do you think play a role in the strategic

decision to go for such a business model?

- Can you name some benefits of being a supplier in a drop-

shipping business model?

- And are there any downsides?

Qualitative

- open questions

Table 1: The interview guideline for the drop-shipping supplier

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All the interview data is processed in the Result Section. As mentioned, Table 1 is split into different

parts based on the variables. Table 2 represents the company variable, Table 3 contains the perceived

usefulness, Table 4 contains the perceived ease of use and table 5 includes the motivations and factors.

After processing the data is reviewed once again in order to ensure that all the important information is

covered in the results section (Braun and Clark, 2006).

3.3 Reliability and Validity

Van Aken, Berends and van der Bij (2012) state in their research that in order to explain both the

reliability and validity of qualitative research there is one factor of high importance. Namely, the

controllability. The controllability is ensured by explicitly depicting the different parts of the research

in the methodology section. This has resulted in every step of this research being recorded and

substantiated.

3.3.1 Reliability

The essence of reliability in qualitative research lies with consistency, which can be created by

standardization (Leung, 2015). According to Van Aken, et al (2012) there are four potential biases which

have an influence on the reliability of a certain research. First; the researcher bias, second; the instrument

bias, third; the respondent bias and finally; the situation bias. This research is conducted by a single

researcher and has been supervised by dr. E.P.M. Croonen (University of Groningen), in order to prevent

the researcher bias. E-mail contact and regular meetings regarding the approach of the research,

interviews and data have contributed to the minimization of the researcher bias. According to Miles and

Huberman (1994) this can be seen as the friendly stranger, who brought in fresh perspective. To further

increase the reliability standardization of the processes regarding data collection, analysis and

interpretation were carried out. The interviews were semi-structured, those were transcribed in a

standardized way as well as the analysis of the data. In order to ensure instrument reliability multiple

sources of evidence were used, consisting of company documents (online) as well as the interview

transcripts (offline). Process triangulation is ensured by consulting multiple sources of evidence (Van

Aken et al. 2012). To avoid the respondent bias, the role and function of the interviewee has been verified

to determine their suitability for the interview. Mainly open questions were asked to allow the

information coming from the respondent to flow more freely and not forcing the respondent into a certain

direction. This emphasized that there was no right or wrong in answering questions. In order to prevent

the situation bias, the interviews were held during different times and days of the week.

3.3.2 Validity

In qualitative research validity is referred to as ‘appropriateness’ of the tools, processes and data

(Leung, 2015). According to Van Aken, et al (2012) this means that the way in which a research has

been carried out, should provide good reasons to believe that through a clear relationship between

execution and conclusions, the results are plausibly true. In order to determine the validity of a research,

the construct, external and internal validity should be taken into account (Van Aken, et al. 2012). The

15

construct validity is referred to as the extent to which an instrument measures what is intended to

measure (Van Aken, et al. 2012). In this research the construct validity has been ensured by taking into

account all the aspects of the TAM, as the perceived usefulness and perceived ease of use (Figure 4)

build up the underlying motivations of the supplier. This instrument was set up in consultation with dr.

E.P.M. Croonen to assure that the instrument measures what is intended to measure. Another important

validity dimension is the internal validity. The internal validity includes the justification and

completeness of the conclusions in a research (Van Aken, et al. 2012). The internal validity is guaranteed

by systematically analyzing and processing the data. Tables are used to structure the interview data in

an accurate and non-conflicting way. At last, the external validity refers to the analytical generalizability

of the conclusions of a research. Due to a limited number of in-depth interviews, the generalizability of

this research is limited. However, the number of studies from a supplier perspective in a drop-shipping

business model, is still very unexplored. This research could function as a starting point.

4. Results In this section the findings resulting from the analysis of the semi-structured interviews are being

discussed. The data is analyzed according through the method of Emans (2004), where the interview is

split in different parts. The goal of Table 2 is to create an understanding of participating suppliers and

how they are related to drop-shipping. Table 3 consists of quotes or explanations related to the perceived

usefulness of drop-shipping. Where Table 4 contains the perceived ease of use. According to Venkatesh

and Davis, 1996; Marangunic and Granic (2015) the perceived usefulness and perceived ease of use

form the basis of the underlying motivations. Table 5 contains the last part of the interview. The goal

here was to obtain information related to the supplier’s motivations and specific factors on why they

operate through drop-shipping.

4.1 Participating supplier’s profile

This Section contains Table 2. The goal here is to create a profile of the different suppliers participating

in this research. All suppliers are labelled from A until F. The second column is used to give some

context on the industry in which they are active, where they operate and for how many years they are

participating in drop-shipping. The third column indicates their business model(s). At last, the

Explanation column contains processed data from the interviews, which was searched for recurring

patterns and other important insights (Braun and Clark, 2006).

Supplier Background Business model Explanation(s)

16

A Industry:

- non-food

consumer goods

(very broad)

Operating in:

- The Netherlands

Drop-shipping:

- for +-10 years

- Drop-shipping

- ‘We are totally aware of the term drop-shipping, we started the

company based on that business model, in 2010 we saw the

opportunity to serve drop-shippers by directly sending orders to

the consumers. Back then we were one out of three companies

operating like this’

B Industry:

- toys,

home goods,

garden goods,

leisure articles

(very broad)

Operating in:

- All over Europe

Drop-shipping:

- for +-13 years

- Drop-shipping

- Wholesaler

- ‘Our company started as a wholesaler, where we have built a

lot of long-term relationships with companies and manufacturers

all over Europe. this has resulted in an extensive catalogue with

an enormous inventory.’

- ‘We started with drop-shipping after the economic crisis of

2007, a lot of retailers and web-shops went bankrupt. Some of

them wanted to make a restart. We offered them the opportunity

to shift from a regular inventory to a drop-shipping strategy.’

- ‘we had a solid foundation as a wholesaler and took the

opportunity to expand by supplying the drop-shippers.’

C Industry:

- non-food

consumers goods

(very broad)

Operating in:

- Benelux

Drop-shipping:

- for +- 7 years

- Drop-shipping

- Wholesaler

- ‘We started as a ‘cash and carry’ 30 years ago. That evolved

into retailers ordering from out catalogue online, while we

delivered at their stores.’

- ‘later on, those retailers expanded with web-shop owners’

‘Requests from drop-shippers kept coming in, so we arranged

with some adjustments that it was possible for us and started to

serve the drop-shippers as well’

D Industry:

- Ecological and

sustainable (non)-

food products

Operating in:

- The Netherlands

Drop-shipping:

- Drop-shipping

- Wholesaler

- Business to

Consumer

- ‘We are a specialist in sustainable and ecological (non) food

products, but not just accessible for drop-shippers’

- ‘We started in 2007 with two different names, one operates as a

wholesaler, participating on the business market. Supplying

retailers, web-shops, hardware stores, department stores, etc.

The other one is a web-shop where we supply the consumer

market’

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- for +- 5 years

- ‘More and more requests from drop-shippers came in, so we

decided to cooperate with drop-shippers from our wholesale

branch and proactively show that to the market’

E Industry:

- Pet supplies

Operating in:

- Benelux

Drop-shipping:

- for +- 2 years

- Drop-shipping

- Wholesaler

- ‘We are originally a wholesaler, with a customer base which

mostly consists of physical stores and web-shops’

- ‘Drop-shippers started to approach us, the number of requests

kept growing and we decided to include drop-shipment in our

organization’

- ‘We supply drop-shippers for over 2 years now’

F Industry:

- high end furniture

Operating in:

- The Netherlands

Drop-shipping:

- for +- 1.5 years

- Drop-shipping

- Wholesaler

- Business to

Consumer

- ‘We started the company, a high-end furniture label, as a

wholesaler / distributing our products to retailer, web-shops

included.’

- ‘We also immediately started our own web-shop to serve

consumers directly’

- ‘Drop-shipping was added later, purely due to the demand of

the market’

Table 2: Profile indication of the suppliers participating in the research

The companies selected for this research, as mentioned in Section 3.1, profile themselves as suppliers

for drop-shippers. What immediately stands out is that they all indeed serve the drop-shipping market.

However, for most of them a regular wholesaling company is the basis of their operations, this is evident

from the ‘business model’ column. This is consistent with the findings of Vellvé and Burgos (2018),

regarding their claim related to the drop-shipping retailers. They claim that the empirical evidence found

on the use and success of drop-shipping limited, because of the difficulty in identifying whether the

organization relies on drop-shipping as a critical element of their business strategy.

As seen in Table 1, only supplier D and F serve the end consumers themselves. Supplier A, B, C

and E limit their operations to wholesaling and drop-shipping. This consistent with the research of

Vellvé and Burgos (2018). They state that, in most cases, it is not possible for consumers to order directly

from the supplier, who only work on a business-to-business level.

What is striking from Table 1, is that there is little difference in the data. There is significant equality

in the supplier’s motive on why they started with drop-shipping. All the suppliers mention that there

was an opportunity which arose from a rising demand in the market. This is in line with Singh, et al.

(2018). They mentioned that with the sudden rise of E-commerce businesses, in which products and

services are sold and bought over the internet, companies started shifting to drop-shipping (Singh, et al.

2018). According to Yu, et al. (2017) it has gained popularity as an order fulfillment policy and business

model for online retailers, spurring the rapid growth of online retail markets.

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At last, supplier B mentioned: ‘We started with drop-shipping after the economic crisis of 2007, a

lot of retailers and web-shops went bankrupt. Some of them wanted to make a restart. We offered them

the opportunity to shift from a regular inventory to a drop-shipping strategy.’. This is consistent with

the claim of Kaluzhsky (2014), who mentioned that the economic crisis which started in 2008 became

a stimulant for the business model, with organizations trying to be more efficient and cost effective.

Since then, the drop-shipping business model is on a rise and has grown in a parallel to the e-commerce

transactions.

4.2 A supplier’s perspective: the perceived usefulness of drop-shipping

Section 4.2 contains the perceived usefulness of drop-shipping, as part of the TAM, from a supplier’s

perspective. All the data regarding the perceived usefulness is processed in table 3. The first column

contains the supplier, the second column contains the overall usefulness of drop-shipping from the

supplier’s perspective, which was asked for during the interview. At last, the explanation column

contains processed data from the interviews, which was searched for recurring patterns and other

important insights (Braun and Clark, 2006).

As mentioned in the theoretical background, the perceived usefulness is referred to as the user’s

perception of the degree to which using a particular system improves their performance. (Venkatesh and

Davis, 1996; Marangunic and Granic, 2015).

Supplier Usefulness Explanation(s)

A - From being very

useful to not useful

anymore

- ‘Drop-shipping does not enable us to accomplish our tasks or operations more

quickly, it is a lot of work for one specific order. Instead of sending a bulk order

to retailer’

- ‘We performed really well in the first 5-6 years. Our only focus was drop-

shipping. So, back then it had a positive effect on our company performance. With

600 drop-shippers listed it was a very effective way for us to sell product’

- ‘Nowadays the competition is rising and our performance declined to a point

where our costs are higher than our revenues. That is why we have decided to shut

down next month’

B - Finds drop-shipping

very useful for the

company

- ‘Supplying drop-shippers enables us to sell more products, it is complementary

to what we started the company for, wholesaling. At this point we are one of the

biggest suppliers for drop-shippers in Europe.’

- ‘It also positively influences the effectiveness of our operations, because due to

drop-shipping we sell more products. This enables us to get a cheaper purchase

price from manufacturers.’

- ‘we have automated a lot of our processes in the last decades, so handling small

orders (which happens with drop-shippers), does not have a negative influence in

terms of man hours or costs’

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- ‘For us it is very useful, we already have everything in house. Just some slight

changes in the software made it work for us. So, with little effort we do create a

higher performance of the company.’

C - Is neutral on the

usefulness of drop-

shipping

- ‘Drop-shipping is a reasonable part of our turnover, but regular web-shops and

shopkeepers are our best customers’

- ‘We have a lot of drop-shippers joining us, but in proportion it is disappointing.

In my opinion, most drop-shippers are fortune seekers. They want to make money

without inventory, while we make the investment.’

- ‘However, we also have drop-shippers who do really well. Their content and

appearance in the search engine is on point.’

- ‘We see drop-shipping as an additional service to keep up with the competition

and serve the demand of the market. It adds value and revenue, but we cannot fully

rely on drop-shipping.’

- ‘Drop-shipping orders compared to regular orders are also more labor

intensive, an order of one product almost takes as much effort as an order of

hundred pieces’

D - Finds drop-shipping

useful for the company

- ‘Drop-shipping is indeed useful for us. We meet the demand of the market,

without making any changes or costs in addition to our standard operations.’

- ‘Drop-shipping is not our main focus; we do not have any software or automated

processes to support our drop-shippers. They have to place their order manually,

change the shipping address and ad a PDF with their label.’

- ‘We already handle small orders, as we also supply consumers directly’

- ‘To put it in perspective, we did not have to make investments or changes and

drop-shipping does generate revenues.’

E - Finds drop-shipping

useful, but not specific

to their company

- ‘Partnering with drop-shippers results in a lot of small orders in our warehouse’

- ‘It makes our warehouse look like a retail store’

- ‘It generates a lot of orders, which of course where profitable. We think that it

definitely can be a useful strategy, however it does not really match with what we

are looking for and how we want to grow’

- ‘We have done drop-shipping for a few years, it created a lot of revenue, but we

have decided to put a hold on it’

- ‘It is very labor intensive, compared to what we are used to’

F - Finds drop-shipping

very useful for the

company

- ‘Drop-shipping enables us to increase our brand awareness. Our products are

sold on multiple drop-shipping websites and consumers are more likely to find us

as a label’

- ‘For us it delivers a considerable proportion of the revenue’

- ‘We had to implement a bidding portal and some extra software, which is done

by an employee. Working with drop-shippers is going really smooth since then.’ Table 3: The perceived usefulness of drop-shipping from the supplier’s perspective

20

According to Marangunic and Granic (2015) the user’s motivation is based on the perceived usefulness

(U) and the perceived ease of use (EOU), which has an influence on the behavioral intention (BI) to use

a certain system (Figure 4). As seen in Table 2, all the participating suppliers operate in a drop-shipping

business model, to some extent. This implies that they all have to perceive drop-shipping as useful in

their case, to some extent. It can be noted from the data in Table 3, that supplier B, D and F indeed

perceive drop-shipping as useful and show similarities in their argumentation. They all state that drop-

shipping increases their performance. Where supplier B indicates that they can purchase their products

cheaper from the manufacturers and that drop-shipping complements their other operations. Supplier D

also finds it useful because they are able to satisfy the demand from the market. At last, supplier F labels

drop-shipping as useful because, besides the performance increase, it generates brand awareness and

enlarges the reach for their products.

On the other hand, there are some differences in the perceived usefulness regarding supplier A, C

and E. Where C is neutral in their perceived usefulness of drop-shipping. According to the data of Table

3, they state that an increase in their performance occurred based on drop-shipping. This usually

indicates that a certain system is perceived as useful according to Marangunic and Granic (2015).

However, supplier C mentioned that drop-shipping is labor intensive and that they consider drop-

shipping as an extra service.

Supplier A mentioned that during the time when they performed well, drop-shipping was considered

useful, mainly because it did have a positive influence on their performance. However, the same as

supplier C, they also find it labor intensive. What stands out from the data of supplier A, is that due to

the high level of competition and declining performance they went perceiving drop-shipping as useful

to being perceived as not useful.

At last, supplier E almost corresponds with supplier C. They also state that there is an increase in

the performance as a result of drop-shipping. As mentioned, this usually indicates that drop-shipping is

perceived as useful according (Marangunic and Granic, 2015). However, supplier E emphasizes that

drop-shipping is too labor intensive and does not match the vision of the company. They are focused on

large orders and deliveries.

Overall, following the data from Table 3, it can be considered that the participating suppliers

perceive drop-shipping alternately useful. The supplier’s intention to use drop-shipping is determined

by the attitude towards drop-shipping. This attitude in turn is determined by two specific believes. The

perceived usefulness (U) and the perceived ease of use (EOU) (Venkatesh and Davis, 1996).

Considering that all the participating suppliers do drop-shipping to some extent and perceive drop-

shipping as alternately useful, the research of Marangunic and Granic (2015) is supported. Where

perceived usefulness is an indicator (in conjunction with perceived ease of use) of eventually using a

certain system. In this case all the participating suppliers perceive drop-shipping as useful and at the

same time they all use drop-shipping.

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4.3 A supplier’s perspective: the perceived ease of use of drop-shipping

Besides the perceived usefulness (U) there is also the perceived ease of use (EOU) as a dimension of

the TAM (Figure 3 and 4), which together forms the attitude and motivation towards using a particular

system (Chuttur, 2009). Section 4.3 contains the perceived ease of use of drop-shipping from a supplier’s

perspective. The data regarding the perceived ease of use is processed in Table 4. This is done similarly

to the perceived usefulness, which ensures consistency. The first column contains the supplier, the

second column contains the overall perceived ease of use of drop-shipping from the supplier’s

perspective, which was asked for during the interview. At last, the explanation column contains

processed data from the interviews, which was searched for recurring patterns and other important

insights (Braun and Clark, 2006).

The perceived ease of use refers to the user’s perception of the extent to which using a particular

system is free of effort (Davis and Venkatesh, 1996; Marangunic and Granic, 2015).

Supplier Ease of Use Explanation(s)

A - From being an easy

model without a lot of

effort to not an easy

model

- ‘In the beginning it was very easy for us to do business with drop-shipping, as I

said, we had a lot of drop-shippers linked to us and we were only one of the three

companies operating in this way’

- ‘Due to this, our products had an enormous reach and we were growing rapidly;

without advertising or putting effort in selling our products’

- ‘We were focusing on our operations and the logistics, while the drop-shippers

took care of the selling process. This enabled us to grow fast.’

- ‘It is an easy business model to work with and indeed flexible in terms of drop-

shippers joining us. It does not cost anything extra and if they quit it is also ok.’

The turning point:

- ‘Nowadays, if I speak for ourselves, the competition is outraging. It is very hard

to grow and keep up with the competition. Let’s say ‘the pool became bigger’,

- ‘More and more suppliers and wholesalers are participating on the basis of

drop-shipping as an additional service. Our only focus were the drop-shippers and

that is not doable for us anymore.’

- ‘It became harder for us to keep the drop-shippers working with us. They went

to other companies and our revenues started to decline’.

- ‘I’m convinced that the model is perfect for unique and branded products, but

not with standard wholesale products which are being sold in the Netherlands and

Belgium’

B - Finds drop-shipping

an easy model

- ‘For us drop-shipping is an easy extra means of growth. We already had

everything set. Everything they sell more is a bit more growth for us. It gives an

extra impulse’

- ‘The drop-shippers working with us are selling all over Europe and that is

effective for our growth. As their customer base grows, ours also grows’

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- ‘It is simply a no-brainer. ‘If you can deliver, you can make money’. Internally

enable to add drop-shippers to our customer base is no big deal. So yeah, a no-

brainer’

- ‘The number of drop-shippers joining us keeps growing’

C - Finds drop-shipping

an easy model on one

hand, but it can also be

a hard model if growing

further

- ‘I sound like I am not very positive about drop-shipping, but that is not the

necessarily the case, because for us the shift to drop-shipping was easy.’

- ‘It costs a bit of money to implement the necessary software and plugs and

annually you have to spend some money to keep it up to date. For us that is roughly

twenty thousand euro’s a year, but that’s it’

- ‘We started with a piece of software and from there on, we could easily build’

- ‘From our experience growing through drop-shipping is hard. However, if there

will be some drop-shippers joining us, like the few good ones we have, there will

be some potential’

- ‘The expansion to more European countries could be something very interesting

for our drop-shipper side of the business’

- ‘The way we have it organized right now, was kind of simple, but if drop-shipping

becomes a bigger part of our turnover, we also have to automate our packaging

hall more than we have now. The drop-shipping orders are relatively labor

intensive compared to the orders of shopkeepers. That part of growing is a little

bit harder’

D - Finds drop-shipping

an easy model to work

with, on how it is going

for the company right

now

- ‘On one hand, we have our wholesaling part of the business and on the other

hand, have a line of business where we serve regular consumers. Fitting in the

drop-shipping side has been easy, because this can run parallel to those

operations’

- ‘Growing through drop-shipping is a little harder or more serious for us. The

orders from drop-shippers are handled as regular orders. The drop-shipper has

to place the order with the right address themselves, including their label/packing

slip. As you can imagine, this is not a perfect system’

- ‘If we want to grow in drop-shipping, we should invest in software and

automation where the drop-shipping website is directly linked to us, our inventory

and logistics.’

- ‘We are happy with how it is going right now, not much effort is put into it, but

it does generate revenue. As I said, we see it as an additional service’

E - Finds drop-shipping a

relatively easy model,

but is not in line with the

company vision

- ‘We started with drop-shipping, because there was a demand from the market.

We did very well on that, a lot of requests and sales came in without a lot of effort’

- ‘Even though we started advertising that we do drop-shipping, it was not the

focus we wanted. We were and still are a wholesaler’

- ‘It became very busy with small orders from drop-shippers, that is why we

recently decided to stop drop-shipping anytime soon.’

- ‘We still will enable our customers, who ran out of inventory, to use drop-

shipping’

23

- ‘It is indeed a fast and easy way to grow, if you can handle it as an organization

and if it is you focus. For us it is not, so that is why we have decided to stay with

our core business and just offer it as an extra service’

F - Finds drop-shipping

an easy model to work

with, especially for

them

- ‘It was an easy choice, the requests for drop-shipping came in. For us it was

relatively simple to enable the collaboration with drop-shippers internally.’

- ‘It is relatively simple to grow through drop-shipping, it helps to create brand

awareness. I must say that we do a screening on the drop-shippers we work with.

Working with drop-shippers who are not professional, can have a negative

influence on our label’

- ‘Our drop-shippers base keeps expanding with entrepreneurs of good quality.

This can also be seen in our revenues’

- I think that for brands or labels, it is a very effective model where the reach you

create relatively to what it costs and takes, is the biggest advantage’

Table 4: The perceived ease of use of drop-shipping from the supplier’s perspective

The second belief on which the user’s motivation is based, is the perceived ease of use (Marangunic and

Granic, 2015). As mentioned in section 4.3 all the participating suppliers do operate through drop-

shipping to some extent. This implies, according to Chuttur, 2009, that at some point they perceived

drop-shipping both useful (improving their performance) as well as easy to use (free of effort) to some

extent. This is corresponding with the data from table 3, that overall, the suppliers perceive drop-

shipping alternately an easy business model to work with. What immediately stands out from the ‘ease

of use’ column in table 4, is that the extent to which the suppliers perceive drop-shipping as an easy

business model to work with, is almost similar to the extent that they perceive drop-shipping as useful.

In the explanation column of Table 3 and 4 different argumentations regarding the perceived ease of use

and usefulness are given. Also, a clear distinction between the two dimensions can be observed while

reading the meaning of them. Where the perceived usefulness is performance orientated and is referred

to as the user’s perception of the degree to which using a particular system improves their performance.

(Venkatesh and Davis, 1996; Marangunic and Granic, 2015). On the other hand, the perceived ease of

use refers to the user’s perception of the extent to which using a particular system is free of effort (Davis

and Venkatesh, 1996; Marangunic and Granic, 2015). This is orientated on effort and ease. Following

the data of Table 3 and 4 it can be considered that despite the differences in the two specific beliefs, they

are also intertwined.

Supplier B, D and F again show similarities. They all consider drop-shipping as an easy business

model to work with. They perceived the process of adapting to drop-shipping or adding it to their

business operations as easy. Both supplier B and F also consider growing through drop-shipping as easy

and very effective, while supplier D considers growing through drop-shipping as hard. Supplier D

indicates that to be able to grow they require substantial investments regarding software and the

automation of their processes. On the other hand, they are satisfied with how it is going for them

24

regarding drop-shipping. The effort they put in is low, while it does generate revenue. This justifies why

supplier D perceives drop-shipping as an easy business model to operate through.

Supplier C also indicates that shifting to drop-shipping was easy for them, while on the other hand

growing through drop-shipping is hard. However, they mention that in their case this relies on the quality

of the drop-shippers as entrepreneurs. They do not mention software or automation as a critical factor

in growing through drop-shipping.

Supplier E’s perceived ease of use corresponds with their argumentations on the perceived

usefulness. In this case they find drop-shipping an easy model to work with. They also mention that

growing through drop-shipping is easy for them, however they do mention again it does not match with

their vision. Supplier E focuses on large orders and shipments.

At last, supplier A shifted from drop-shipping being perceived as an easy business model to operate

through to being perceived as hard. Again, this is caused by the rising competition in the market. Back

when they perceived drop-shipping as an easy business model it was mainly because the reach that it

created for their products, that they had a lot of drop-shippers linked to them and growing through drop-

shipping was easy and went rapid.

As mentioned in the theoretical background, the user’s motivation lies in front of the BI. The

motivation is based upon U and EOU and influences the Behavioral Intention (Venkatesh and Davis,

1996) (Figure 4). Overall, following the data from Table 3 and Table 4, it can be considered that the

participating suppliers perceive drop-shipping alternately useful and an easy business model to operate

through. Section 4.4 discusses the motivations related to why actually participate in the drop-shipping

business model (Chuttur, 2009). Also, the factors influencing their perception on drop-shipping are

shown in Table 5.

4.4 The motivations and the factors that influence the supplier’s perceived usefulness and

perceived ease of use.

Section 4.4 contains the suppliers underlying motivations on why they operate through drop-shipping

and the factors which have an influence on their motivations. As mentioned in Section 2.3, the

underlying motivations, in this research, is referred to as the motive for the supplier to use the drop-

shopping business model. The underlying motivations or motive of the suppliers is based upon the

perceived usefulness (U) and perceived ease of use (EOU) regarding the business model. This than

results in the behavioral intention of the supplier to participate in a drop-shipping business model (Davis

and Venkatesh, 1996; Marangunic and Granic, 2015). Considering Section 4.2 and 4.3, drop-shipping

from a supplier’s perspective is perceived as alternately useful and also perceived as alternately easy

(among the participating suppliers). The goal of section 4.4 is to obtain knowledge regarding the

motivation, which substantiate the perceived usefulness (U) and perceives ease of use (EOU) (Chuttur,

2009).

25

Also mentioned in Section 2.3 is that the factors influencing the supplier to participate in a drop-

shipping business model result from the interviews that were held. These factors play a role in the

perceived usefulness (U) and perceived ease of use (EOU). The U and EOU then form the underlying

motivations of the suppliers. This Section also aims to get an understanding of the different factors

which influence the suppliers Perceived usefulness and perceived ease of use.

The first column of Table 5 contains the supplier, the second column of table 5 contains the

supplier’s motivations which emerge from the processed data and the last column contains the factors

influencing the suppliers perceived usefulness and perceived ease of use.

Supplier Motivations on why they do

participate in drop-shipping

Factors which influence the motive to operate

in drop-shipping

A - ‘We saw the demand in the market for selling

products online, while outsourcing the

inventory and shipment. It was a gap in the

market and we took it’

- ‘It was a nice and easy way of working. If

you look at it in a different and simple way;

we had over 600 sales people selling our

products payed on a commission base (they

sell at our cost price plus their profit)’

Beneficial:

- ‘It can ensure a huge range for your products and facilitate

growth relatively easy’

Disadvantageous:

- ‘It is very labor intensive, so you have to organize

everything internally very well’

- ‘The rising competition makes it very hard to work with,

also channels like bol.com and amazon.com enhanced that

effect’

B - ‘We saw the opportunity during the

economic crisis, while the demand for drop-

shipping began to rise’

- ‘drop-shipping was easy for us to integrate

into our business operations, while enabling

us to sell more products’

- ‘It is an extra means of growth to us’

Beneficial:

- ‘We have over 20 years of automation in our company and

it happened that drop-shipping could be intertwined quite

easily, which can be an issue for other companies’

- ‘Drop-shipping expanded our reach, we were selling in

some parts of Europe, but now we also (indirect) customers

in for instance France, Italy and Spain and customer base

keeps growing’

- ‘The investments we had to make were not very significant,

this made it an easy decision’

C - ‘Requests from drop-shippers started to

come in, we were able to meet those requests

in addition to our current operations’

- ‘We see drop-shipping as an additional

service and a requirement to keep up with the

market’

- ‘Drop-shipping is popular, so it is part of the

deal’

Beneficial:

- ‘The expansion to more European countries could be

something very interesting for our drop-shipper side of the

business’

- ‘Some of our drop-shippers do very well, these are indeed

beneficial for us, without a lot of effort’

Disadvantageous:

- ‘We have a lot of drop-shippers joining us, but results are

disappointing in proportion to other customers, most of them

26

- ‘Shifting within the company to enable drop-

shipping was easy for us with the base we

already had. It only costs a bit of money’

- ‘It brings us revenue’

are fortune seekers…. However, some of them do perform

well’

- ‘Serving drop-shippers is labor intensive, relative to bulk

orders’ ‘Many actions have to be taken, for a little margin’

- ‘growing through drop-shipping is hard, however there is

still some potential’

- ‘’To be able to scale with drop-shipping, we need more

automation in our processes, as I mentioned the packaging

hall for example’

D - ‘We started with drop-shipping a little later

than 2007, more and more requests came in.

We already served end consumers with our

web-shop, so that was easy and doable to add.

Besides, we already did drop-shipping for our

customer base, when they ran out of

inventory’

- ‘Drop-shipping is still an extra service to us,

because there is a demand from the market.

We do not have any software to support our

drop-shippers, every order has to be done

manually’

- ‘It generates extra revenue and profits,

without increasing our costs (significantly)

Beneficial:

- ‘Adding drop-shipping to our business operations, enabled

us to serve more end-consumers and increase the reach of

our ecological products’

Disadvantageous:

- ‘We do not have the software that enables our customers

to convert the catalogue, prices, pictures, etc. directly to

their website… this would require major investments’

- ‘I think when we include more software, which increases

the automation process, there will be some improvement that

can be made’

- ‘Changing our software and ordering process, would

enable us to grow’

E - ‘A great demand for drop-shipping arose

and we did have to change or add anything in

order to respond to that demand’

- ‘We still do drop-shipping, but only as a

service for our regular customers’

Beneficial:

- ‘It delivered a great extra revenue with a lot of new

customers. It went very well quite easily’

Disadvantageous:

- ‘Drop-shipping causes too many small orders in our

warehouse’

- ‘We did really well, but we started to look like a consumer

shop, which is not the match we were looking for. We are

designed to handle large orders and shipments’

- ‘It became too busy with small orders’

- ‘It yields too little for how much work it is’

F - ‘We started with drop-shipping purely

because of the demand in the market. Drop-

shippers started to contact us’

- ‘The model is relatively easy to work with

and also a simple way to grow. For us it only

has advantages’

- ‘The costs and effort easily weigh against the

benefits for us’

Beneficial:

- ‘An important factor for us, as a label, is that increases our

brand awareness and the reach that it delivers. Every drop-

shipper selling our brand is an ‘extra shop’ retailing our

products’

- ‘An employee of ours fixed everything related to the

software implementation, which saves a lot of costs and

trouble for us’

27

Disadvantageous:

- ‘Not all the drop-shippers have the right qualities to be an

entrepreneur. In the beginning we had some problems with

drop-shippers selling our label. It is your name which can

be soiled. That is why we had to implement criteria and some

tests to ensure that the collaboration with a drop-shipper is

beneficial and worth the effort (for the both of us)

Table 5: The motivations and factors regarding the supplier’s perspective on the participating in a drop-shipping business model

What immediately stands out in the motivation column of Table 5 is consistent with the findings

presented in Table 2. All the participating suppliers mention that the main motivation on starting to

operate through drop-shipping, was the demand from the market as (potential) drop-shippers approached

the suppliers. Considering Table 5, a second motivation which is mentioned by all the suppliers to some

extent, is that shifting to drop-shipping and involving it into their business operations seemed relatively

easy and inexpensive. Apart from the similarities mentioned there are not significant differences in their

argumentation. Supplier C and D both emphasize the motivation that drop-shipping serves as an extra

source of revenue. While supplier B and F mention the motivation that operating through drop-shipping

serves as a means of growth. Where Supplier C, D and E emphasize the motivation of drop-shipping

serving as an extra service. This implies that they do not rely on drop-shipping as a critical element of

their business strategy and that it serves as complementary to their primary business operations (Vellvé

and Brugos, 2018).

The column, in Table 5, which contains the factors influencing the suppliers shows the factors that;

have a beneficial influence on the supplier’s motive to operate through drop-shipping as well as factors

that have an adverse influence on the supplier’s motive to operate through drop-shipping. According to

the data from Table 5, supplier A, B, D and F mention a factor which implies that operating through

drop-shipping enlarges the reach of their products. This corresponds with the claim of Vellvé and Burgos

(2018). They imply that the supplier has the advantage to expand their distribution capacity since it

brings together a large number of online retailer stores selling their products. According to them, this

should result in economies of scale. Parallel to enlarging the reach of their products, supplier F mentions

that an important factor for them is that drop-shipping supports the creation of brand awareness. Singh,

et al. (2018) state that every business irrespective of any sector feels the need to make their online

presence, so that brand awareness can increase and a large audience can be reached.

According to the data from Table 5, the most common factor which has an adverse effect on the

supplier’s decision to operate through drop-shipping is that they perceive it as labor intensive. This is

stated by Supplier A, C and E. Both Supplier C as well as supplier F mention the adverse factor of the

disappointing performance as well as the drop-shipper’s entrepreneurial qualities being below par, is

some cases. Supplier A mentions that the high level of competition is a factor which influences their

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decision on continuing to operate through drop-shipping, where Supplier C mentions that growing

through drop-shipping is hard.

At last, what stands out from the data in Table 5 is that Supplier B, C, D and F all mention that

software and automating processes is considered as an important factor. This is categorized as a

beneficial factor for Supplier B and F, where supplier B indicates that the software and automation is

already present in their organization. Supplier F stated this was perceived as easy and not significantly

expensive for them to implement. While on the other hand, supplier C and D state that this is perceived

as an adverse factor influencing their decision to operate through drop-shipping. According to them, the

software and automation require significant investments.

5. Discussion and Conclusion This section contains the conclusion of the research, the theoretical implications, the managerial

implications, the limitations and the directions for future research.

5.1 Conclusion

As Chapter 4 shows, all the suppliers, apart from supplier A, are wholesale companies from origin. This

indicates that empirically substantiating if a supplier relies on drop-shipping as a critical element of their

business strategy is difficult (Vellvé and Burgos, 2018). Considering the data and the findings of Section

4.2 it can be concluded that all the suppliers operate through drop-shipping to some extent.

Overall, the suppliers perceive drop-shipping as useful, the perceived usefulness is one of the

specific beliefs to explain why the suppliers participate in a drop-shipping business model Marangunic

and Granic (2015). The main arguments that emerge from the results is that it increases their

performance in terms of revenue and profits, to some extent. They also indicate drop-shipping as useful,

because they are able to meet the demand of the market. Another argument that is given several times,

is that supplying the drop-shippers is perceived as labor intensive. This, according to the data, is

perceived as a negative factor influencing the usefulness of drop-shipping from a supplier’s perspective.

According to the findings in Section 4.3 drop-shipping is perceived as a predominantly easy

business model to operate through for the suppliers, as well as it is perceived as useful. Overall, they

imply that the process of adding drop-shipping to their business operations was easy. It did not require

significant investments in their current situation, they indicate that the revenue it generates outweighs

the costs and effort. The argumentation of growing through drop-shipping diverged. For some of the

participating suppliers growing through drop-shipping was perceived as easy and effective. For others

growing through drop-shipping was perceived as hard, or that it would require significant investments.

29

It can be concluded that all the participating suppliers do operate through drop-shipping to some

extent. This implies, according to Chuttur, 2009, that at some point they perceived drop-shipping both

useful (improving their performance) as well as easy to use (free of effort) to some extent. These specific

beliefs form the motivation and behavioral intention of the supplier’s decision to operate through drop-

shipping (Marangunic and Granic, 2015). These findings support the existing literature of TAM.

The research question of this study is: What factors influence the degree of acceptance and what

are the underlying motivations (motives) of suppliers to participate in a drop-shipping business model?

Regarding the factors that influence the supplier’s motivations to participate in a drop-shipping business

model, it can be concluded that there are factors which have a beneficial influence on the supplier’s

motivation to participate in a drop-shipping business model and that there are factors that have an

adverse influence on this motivation. The first beneficial factor, is that drop-shipping enlarges the

supplier’s product reach. Vellvé and Burgos (2018) imply that the supplier has the advantage to expand

their distribution capacity since it brings together a large number of online retailer stores selling their

products. The second beneficial factor, is that drop-shipping enables the creation of brand awareness.

Singh, et al. (2018) state that every business feels the need to make their online presence, so that brand

awareness can increase and a large audience can be reached. Factors that have an adverse influence on

the supplier’s perceived usefulness, perceived ease of use and therefore the supplier’s underlying

motivation are: that drop-shipping is considered to be labor intensive. Second, that the performance and

entrepreneurial qualities of the drop-shippers can be disappointing. Third, that growing through drop-

shipping is considered to be hard. At last, a factor that is considered to be beneficial as well as adverse,

depending on the situation. This factor includes software and automation, which can be concluded to be

beneficial in cases where it is already reasonably in order and adverse in cases where it requires

significant investments and effort. Those are the factors that influence the supplier’s motive to

participate in a drop-shipping business model.

the main underlying motivation, or motive, given by the suppliers to participate in a drop-shipping

business model, is that they were all faced with a rising demand for drop-shipping from the market. The

second motivation that can be concluded on why suppliers operate through drop-shipping, is that drop-

shipping was relatively easy to implement complementary to their primary business operations. A less

common motivation from suppliers is that drop-shipping serves as an extra service for them. At last, a

motivation that it serves as an extra source of revenue and that it serves as an extra means of growth can

be concluded.

5.2 Theoretical implications

This research adds to existing literature in several ways. Where multiple studies examine drop-shipping

from a retailer’s perspective and make claims about the business model being beneficial for the drop-

shipping retailer in terms of storage costs, upfront investments, logistics and warehousing (Chen, et al.

2018; Singh, et al., 2018; Witowski, et al., 2020; Vellvé and Burgos, 2018; Kaluzhsky, 2014), no claims

30

were made from the supplier’s perspective of the business model. Kamalapur and Lyth (2020) state that

further research on drop-shipping is needed to map a variety of different parameters to expand the

academic literature on the use of the business model. They suggest to further study the supplier side of

drop-shipping. Also, Musa, et al. (2016) suggest further research on the adoption of the drop-shipping

business model. This research contributes to the drop-ship literature by examining the supplier side of

drop-shipping and their perspective on the business model.

Drop-shipping on one hand, as stated in this research, is seen as a business model. Where on the

other hand, for example Yu et al. (2017), classify drop-shipping as an information system. Most studies

use the TAM for specific technologies or information systems (Marangunic and Granic, 2015; Chuttur,

2009). This research contributes to the TAM literature, because in this case it has been successfully

applied to the drop-shipping business model. This increases the applicability of the TAM and potentially

expands the possibilities of this model.

5.3 Managerial implications

The findings of this research show the motives of suppliers to participate in the drop-shipping business

model and the factors influencing the motives. These insights provide a practical contribution for

retailers who are looking for a collaboration with such a supplier, by understanding their perspective

and make good use from the insights of the research. On the other hand, the findings provide potential

suppliers, who consider to participate in the drop-shipping business model, with knowledge and insight

in the motives on why others do drop-shipping. They can make good use of what is considered as an

adverse or beneficial factor to other suppliers in the market. Potential suppliers can take the knowledge

of this research in consideration when they are deciding whether to participate through the drop-shipping

business model.

5.4 Limitations and directions for future research

As mentioned in section 3.3 Van Aken, et al. (2012) state that the reliability and validity of a qualitative

research depends strongly on the controllability. The controllability is ensured by explicitly depicting

the different parts of this research in the methodology section. However, the controllability, reliability

and validity would be stronger if the participating suppliers would have been selected in a structured

way on the basis of specific criteria. This would also increase the instrument reliability. In this case,

suppliers were chosen only by the criteria if they participate in the drop-shipping business model to

some extent and were picked through different search engines. This enabled the possibility that drop-

shipping was not their primary business operation and creates difficulty in distinguishing and identifying

whether the supplier relies on drop-shipping as a critical element of their business strategy (Vellvé and

Brugos, 2018). In this research the construct validity has been ensured by taking into account all the

aspects of the TAM, as the perceived usefulness and perceived ease of use (Figure 4) build up the

underlying motivations of the supplier. However, the actual system usage is left out and the behavioral

31

intention of the model has been applied in a slightly different way than it was designed for. This

decreases the construct validity. The generalizability of this research is limited, because it is based solely

on six respondents.

This study is conducted on the basis of the TAM, the use of the TAM might neglect other potential

interesting and applicable theories or models that are suitable to examine drop-shipping from a supplier’s

perspective. Applying other models or theories on the supplier’s perspective of drop-shipping might be

a direction for future research. This research contains suppliers who all participate in a drop-shipping

business model and are active in various industries. More interesting insights will be gained when future

research focusses on a specific industry and will contain supplier’s who do not (yet) participate in the

drop-shipping business model.

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Appendix A: The interview Guideline

The Interview Guideline

1. A short introduction from both the interviewer regarding the research as well as the interviewee on personal level and what the interviewee’s function in the organization is.

2. The Company

- Can you tell me something about the company? - What does the company do? - How do they operate/what does the business model looks like? - Why does the company operate like that?

- Has the company always done business that way? - If not, what has changed? - And why?

So, this interview is about suppliers in a drop-shipping business model. Are you aware of the term drop-shipping? Would you describe the organization business model like that? Why?

3. Perceived usefulness

- Using Drop-shipping in our business would enable us to accomplish tasks (operations) more quickly?

- Does the company performance change by using Drop-shipping? - Does drop-shipping affect the effectiveness of the operations? - Does drop-shipping make it easier to do business? - Do you find drop-shipping useful for the organization?

4. Perceived ease of use

- How would you describe learning to operate via drop-shipping? - Is it easy to operate via drop-shipping as the company wants to? And why? - Is operating via a drop-shipping business model understandable and clear? Why? - Do you find drop-shipping a flexible model to work with? Why? - Is it easy for the company to grow via drop-shipping? - Do you find drop-shipping an easy business model to operate through? And why?

5. Motivations and factors

- What is your belief/perspective in the business model? - Why did the company choose to operate through such a business model? - What factors do you think play a role in the strategic decision to go for this model? And why? - Can you name some benefits regarding your company on why you operate through drop-

shipping? - Are there any downsides from your perspective to the business model?

34

- What factors can be of influence for the company to decide to change to a different business model? And why?

- What factors have a strengthening effect on the company to stay with the business model? - Are there any remarks or question from your side?

Appendix B: Revised 6 items scale perceived usefulness

Revised 6 items scale for perceived usefulness worded towards Drop-shipping

Item No. Candidate item for psychometric measures for perceived usefulness

1 Using Drop-shipping in our business would enable us to accomplish tasks

(operations) more quickly

2 Using Drop-shipping would improve our company performance

3 Using Drop-shipping in our business would increase the productivity

4 Using Drop-shipping would enhance effectiveness on our operations

5 Using Drop-shipping would make it easier to do business

6 We would find Drop-shipping useful for our business

(Chuttur, 2009)

Appendix C: Revised 6 items scale for perceives ease of use

Revised 6 items scale for perceived ease of use worded towards Drop-shipping

Item No. Candidate item for psychometric measures for perceived ease of ude

1 Learning to operate via Drop-shipping would be easy for us

2 For us it is easy to operate via Drop-shipping as we want

3 Operating through Drop-shipping is clear and understandable for us

4 We find Drop-shipping a flexible model to work with

5 It is easy for us to grow via Drop-shipping

6 We find Drop-shipping an easy model to operate through

(Chuttur, 2009)