The solution for fashion retailers’ inventory dilemma? Increasingly, not holding any inventory at all.
Fashion brands have been burned by traditional wholesale: Late payments and abrupt closures have become the norm amid sector-wide consolidation. That’s leading more labels to gravitate towards what, at first brush, appears a safer option: online marketplaces that offer drop shipping — a wholesale alternative where labels fulfil customers’ orders directly from their inventory instead of selling a bulk of their goods to a retailer.
These sort of marketplaces are as old as e-commerce itself — think Amazon, Etsy and Wayfair — having long operated by listing goods from third-party sellers instead of buying inventory. But interest in fashion-specific marketplaces that specialise in drop shipping is accelerating. In 2025, the 11-year-old luxury e-tailer Garmentory received 40 inquiries from new brands a month, double from around 20 in 2023. Similarly, 5-year-old Cult Mia has seen the number of brands that want to sell on its marketplace grow to 250 a month in 2025 from 75 in 2023.
On the surface, drop shipping looks like a win-win: The marketplaces get to test new labels without making big inventory commitments or paying to store goods that may never sell in a warehouse. The brands, in turn, get to take risks with the items they offer, and are paid commissions per sale instead of waiting for a bulk payment months after orders are delivered to a retailer.
But drop shipping comes with its own set of complications. Brands are responsible for fulfilling each order, which requires resources smaller labels may not have. The retailers also relinquish shipping control, risking a lack of consistency in how customers receive their orders. There’s the concern that since brands are doing the listing, the product assortment won’t be as curated.
For drop shipping to live up to its potential, marketplaces have to help brands with backend operations to ensure a seamless customer experience without taking on too much of the financial burden. They also have to develop a product curation strategy that excites shoppers but isn’t restrictive for the brands. The marketplaces that hit the right notes have a better chance of establishing long-term partnerships.
“The goal of a healthy brand retailer relationship is that it’s one that is long lasting, and for that to happen, it needs to be that both sides are seeing the benefit and that the benefits outweigh the cost,” said Amanda McCormick Bacal, senior vice president and global head of marketing at wholesale software platform Joor.
Assessing the Benefits
At its best, drop shipping functions like a hybrid between selling direct-to-consumer and wholesale. Labels can sell their jeans, dresses and blouses in the colours and patterns they want without pushback from a picky buyer, while reaching a larger audience than they’d get on their own physical and digital storefronts.
Among the biggest benefits to drop shipping is better payment terms than wholesale, where giants like Saks are delaying payments by as much as three months after orders are fulfilled. With drop shipping, brands are paid a commission per transaction instead of waiting for a large lump sum payment from a bulk order. That’s especially attractive for smaller labels like the Beirut-based bridal wear brand Joanna Andraos, which sells through Cult Mia and has seen its sales on the platform more than double in the current quarter compared to the previous one, said Andraos, the brand’s namesake founder.
Wholesale may allow the brand to sell 20,000 units to a retailer at once, but there’s no guarantee those items will be eventually sold to the consumer, Andraos said. “I prefer to sell 100 units and make a much higher profit.”
Some marketplaces are looking to give their brand partners an even bigger share of the pie. This year, The Folklore, a marketplace and software firm that works with brands in emerging markets like Nigeria and Colombia, cut the commission it takes for each sale done through its site down from 25 percent to 6 percent as it starts enabling brands to sell their goods across multiple marketplaces in addition to the company’s own e-commerce shop. The lower commission rate also helps offset the monthly fee the company charges for its software services.
“We look at ourselves as being a commerce technology solution for these brands to be able to run their own business better,” said Amira Rasool, The Folklore’s founder and chief executive. “A lot of brands right now are valuing ownership.”
Considering Curation
While drop shipping can allow multi-brand retailers to sell a wider range of items, marketplaces still need to approach product curation with a sharp editorial eye. Doing so is necessary to avoid becoming a space for brands to offload styles they are struggling to sell elsewhere or introduce silhouettes or categories that are unlikely to resonate with the retailer’s customer base, said Bryan Eshelman, partner and managing director at AlixPartners.
“A multi-brand retailer should be cultivating a trusted relationship with customers that really centers on curation and helping customers find the right products that align with the brand proposition of that retailer,” Eshelman said. “When you start to go beyond that, you start to undermine that trusted advisor relationship.”
Cult Mia’s approach to curation starts with its vetting process. Each month the company onboards 10 percent of the 250 brands that want to sell on its marketplace based on how unique their products are and if they’ll fill in gaps in Cult Mia’s assortment. The company also takes customer recommendations for brands to feature on the site, giving shoppers a €250 ($272) credit if the label they referred makes it onto the marketplace, said Nina Briance, Cult Mia’s founder and chief executive.
“You don’t need millions of brands to get to an interesting scale,” Briance said. “Within curation, there’s a lot more you can do via personalization to make each customer’s experience better.”
A Backend Boost
Marketplaces that deploy drop shipping are able to forgo investing in buying and storing inventory, but that doesn’t mean they can take a hands-off approach to logistics. That’s particularly the case if they’re predominantly working with smaller-scale brand partners, who may struggle to offer a high quality customer experience while fulfilling orders for both their own and a marketplace’s sites.
The e-tailers have to decide how much of the operational burden they’re willing to share with their partners. Garmentory, for example, takes on the shipping costs on behalf of its brands since it has better rates with carriers like DHL. The company also invests in AI-powered technology to automate manual tasks such as generating product descriptions or matching a brand’s sizing chart to Garmentory’s, condensing the product listing process, said Sunil Gowda, Garmentory’s founder and chief executive. But the company has no plans to open warehouses like Amazon or operate a photo studio where brands send items to be shot for the site like Farfetch, Gowda added.
“We understand how to run an online-only business, how to do digital marketing,” Gowda said. “We don’t want to take on the physical aspects of the operational, complexity of managing warehouse space and fulfillment.”
Despite drop shipping’s rising popularity, the model won’t completely replace traditional wholesale — those bulk payments, though at times unreliable, remain a lifeline for emerging labels. But the level of collaboration required to make drop shipping a worthy investment for brands and retailers can help reshape the sometimes tense dynamics that come with multi-brand retail, said Juan Pellerano-Rendón, chief marketing officer at e-commerce logistics start-up Swap.
“It comes down to a renegotiation of how this relationship works,” Pellerano-Rendón said. “That means likely redrawing a lot of the relationships and what they’ve been in the last 10, 20, 30 years.”
Content shared from www.businessoffashion.com.
