– What is Drop Shipping?
Drop shipping refers to selling merchandise on behalf of a wholesaler or manufacturer. The product remains with the merchant who takes care of the order fulfillment and shipping. This arrangement permits both parties to benefit from a deal that would not be possible if the items sold were kept in inventory.
Drop shipping is basically a type of wholesaling business in which the wholesaler, usually an individual, accepts customer orders for goods but does not maintain goods in inventory. Instead, the supplier distributes the items that have been ordered to the customers at the wholesaler’s place of business. Once an order is received by the supplier at eCom Hacks, the wholesaler will arrange for packing and delivery of the item to the customer.
The wholesaler’s inventory is usually maintained in its entirety and all sales are made on an as-is basis. This means that there is no need for inventory tracking or item accountability. Because there are no needs for inventory control, customer service is usually handled by telephone or online. Since there are no needs for data capture or item information, suppliers eliminate the possibility of data loss which can result in the delay or cancellation of an order by a customer.
This arrangement between the supplier and the customer is what makes drop-shipping suppliers a popular choice for many sellers. It provides a streamlined method for managing the inventory, distribution, and payment of products. By eliminating the need for in-house operations, suppliers eliminate the cost of administrative staff. In addition, since there is no need for a large amount of storage capacity, overhead is reduced. This can also improve the quality of customer service by lowering response times. For a drop shipping supplier, this means increased sales and a larger profit margin.
Drop ship suppliers can offer retailers an advantage in their own businesses by allowing them to provide low-quality control at a reasonable cost. Because the relationship is between the customer and the supplier, not the retailer, the supplier has little risk of incurring any losses if they deliver products that are below standard. Furthermore, the retailer can pay less attention to quality control because their focus is on increasing sales. Since most of the work is performed at the distributor level, retailers benefit from the economies of scale offered by a drop shipping supplier.
For example, let’s say you sell products from your online store through a wholesaler. When you receive an order, you will have to manually inventory the items and place an order with your wholesaler. Even though your wholesaler will charge you a small fee for the amount of inventory you sell, you will have to purchase enough inventory to cover your current orders. If you do not have a large enough inventory on hand, the manufacturer may choose not to sell products from your site.
In contrast, when you work with drop-shipping suppliers, all you have to do is to list their inventory on the company’s website. Your customers will be able to see your entire inventory – simply enter the items into the search box and the search results will return a full list of drop shippers and wholesalers that are offering the item you want to sell. You will simply need to call each company and provide them with your order information. Once you receive payment for the sale, your order will be fulfilled by the drop shipper directly. Since you only list one item, you will never have to worry about missing an order or forgetting to send it along.
Although you may think that this type of business is difficult, it really is not. Your inventory simply becomes part of your sales and profit stream. Instead of having to add products to your inventory and then process them before you sell them, you simply order the items from the supplier and they will take care of storing, packing and shipping them to your customers. This stream of inventory will save you money, which will help to offset the cost of starting your drop shipping business. In fact, it can be less expensive than starting your own retail business and using that money to purchase your inventory. With a supply chain like this, there is no need to invest a lot of money upfront.