Internet retailers operating under a drop-ship strategy offer a unique research context in which to examine the link between financial performance and physical fulfillment performance. In the following section, we discuss the reasons for this and present an overview of the relevant literature and industry context. We draw on this literature in Section 3 as we elaborate on the theory of PDS and price margins, which in turn leads to the development of the propositions and a discussion of the study’s empirical design in Section 4. The empirical methodology used to collect the data and test the propositions and the results obtained from these tests are presented in Sections 5 and 6,respectively. Finally, Section 7 closes with a discussion of these results, the study’s conclusions, and opportunities for future research.