Second, as part of drop-shipping, retailers may be willing to yield some of their margins to their suppliers in exchange for not having to invest in inventory acquisition or pay for warehousing costs and inventory carrying costs (Netessine and Rudi, 2004). At the same time, drop-shipping requires retailers to make PDS performance and pricing decisions to attract customers without the benefit of control over stocking and distribution policies for their products. This erosion in margins and the separation of pricing and logistics decisions can blur retailers’ PDS assessments and lead them to post-price offers that do not cover the costs incurred in selling products to consumers (Netessine and Rudi, 2004). These conditions cause retail margins and their link to PDS performance promises to be less readily observable than under other supply chain strategies, making the study of the PDS-margin relationship more compelling.