What Is Drop Shipping?

By Author: Ann Hoskins
Total Articles: 30
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It's as simple as defined below:

Drop Ship is a kind of supply chain management technique where the retailer does not keep all the goods in stock, instead transfers either to the wholesaler or the manufacturer, the details of the customer orders and shipment. The manufacturer then supplies the goods directly to the customer. The profit for the retailers is made on the difference between the retail price and the wholesale price.

The duty of the retailers is to display a catalog or website or the demo piece of the goods for sale. The customers look at these pieces and make their order. This wholesale business can occur when a small public retailer receives a single large order for a product, thus making it a wholesale source for the bulky products. Drop shipping
is very common for bulky products like steel buildings.

Bidding can also be initiated online for a product from the retailer. The seller who wishes to sell the product drop ships on sites such as ebay, where the customers ...
... can participate in a live online auction and receive the product directly from the seller after making the necessary payments. In such situations, the seller gains a huge profit by selling it to the buyer with the highest bid.

Benefits of this wholesale news include: a positive flow of cash as the seller is paid only after the purchase; no upfront inventory to purchase products; no duplication as there is a perfect distributor for a single product; and shipping costs can be minimized. However, there is always a risk in any kind of business that is taken up. In this kind of wholesale business, there is a risk of back ordering the products. Back ordering occurs when there is a shipment request after the product has been sold out. This risk can be avoided by keeping the retailers updated about the products being transacted with the wholesaler.

Drop shipping also has prominent scams to be aware of. These are the internet based home based business scams. There is again a same procedure for these kind of scams but then, these artists are not real wholesalers. They are middle men acting in a level between the wholesalers and the retailers. Buying products through them is a high level of unreliability as there is always a risk of being cheated with falsified products and auctions.

Private label drop shipping is an emerging trend in drop ship
business. Here a manufacturer produces a customized product and ships it to the retailer. The range of products through the private label shipping varies from simple key chain and t-shirts with creative logos and pictures to vitamins and nutritional supplements with customized formulations.


Ann Hoskins has been writing and publishing articles about wholesale and drop shipping. She is a business consultant and has been specializing in logistics management and shipping for more than 10 years.