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What is drop shipping?

| Blog | January 8, 2013

In this post we will cover what is drop shipping and how it works as well as how it can benefit your online business.

Drop shipping is a method of supply chain management technique where the retailer takes the payment for the order and the customer purchases the goods directly from the maker or the wholesaler.

  • Difference Between General Shipping Processes And Drop Shipping

Here the retailer acts as basically a middleman. In return, the retailer gets some commission for each order or in any other kind of arrangement which differs from one company to another. The method of drop shipping is very beneficial for small scale companies and online businesses, but companies of any type and size can take up this method of supply chain management for their profits.

  • How Does Drop Shipping Actually Work?

There is a definitive cycle in the way the whole process works-

a)      At first the customer places his or her order to the retailer.

b)      The retailer pays the wholesaler for the order.

c)      The customer gets the goods from the wholesaler directly.

d)     The retailer gets a commission from the wholesaler.

This is the simplest way to understand how the whole matter of drop shipping works.

  • Advantages Of Drop Shipping

If you are in the business sector then taking up drop shipping can be very beneficial-

a)      You reduce the risks of loss as there is no question of having excess inventory burden.

b)      You don’t have to bother about packing your material, getting, and making deliveries.

c)      The product reaches the customer directly from the manufacturer thus reducing risks of damage.

d)     No need to worry about storage facilities.

e)      You can handle more than one type and more number of products as you doesn’t have to worry about storage space, deliveries, etc; thus you get to save a lot of money and still get your hands full with more customers.

These are the main benefits of drop shipping but there’s a downside to this too.

  • Be Careful

You won’t be able to verify the goods yourself so if the goods are already damaged when they reach the customer, it’s your reputation at stake as you are the one making the deal. Delivery can be late and there is always a possibility of scams. So it’s a safe idea to always check out the manufacturer well and choose the one with a good reputation. I hope our article helped you gain a better understanding of what is drop ship and how it works. It is truly a awesome service if you not looking to hold any stock. In a next post I will list the top 10 drop ship companies that are trusted for their dropshipping services.

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