Paid for inventory can sit on your shelves, tying up capital . When you own the inventory, you also own the risk. If a product doesn't sell, you're stuck with disposing of it at pennies on the dollar. You must have an efficient fulfillment system . But Internet retail requires an entirely different kind of fulfillment system.
Internet retail is essentially mail order, with shipments going out in parcel sizes to end users.
An inefficient fulfillment system can lose for you the advantages in good customer service that holding the inventory gained for you. A fulfillment house, the offspring of the direct marketing industry, will handle some or all of the aspects of getting the product to your customer. They will maintain inventory, order new product, assemble, pick, pull, pack, and ship, all according to your specifications and with your labels. They will also handle the order taking, the Internet shopping cart, and provide an ordering and customer service call center if you need one. In other words, you can run an entirely virtual business, outsourcing everything to the fulfillment house, if you like.