Dropshipping is basically an online distribution system where the manufacturer either keeps the products in stock or provides it directly to its customers at wholesale prices. Drop shipping also known as on-demand manufacturing is a cost effective supply chain management system where the retailer does not maintain inventory in his store but rather transfers the order details and shipment details directly to an independent dropshipper, another retailer, a third party, or a wholesale distributor, who then directly ships the products to the customers.
This arrangement allows the retailer to manage the inventory of products without maintaining a retail facility. Since the product does not require any inventory, the retailer does not have to spend money on rent for a shop or other business equipment.
Drop shipping Online
It has become very common these days to see websites with a dropshipping option. These websites allow customers to place an order through their website and pay for it with their credit card or PayPal account. The site will then place the order with the dropshipper who will either ship the product directly to the customers or deliver it to a retailer’s warehouse.
Once the product reaches the retailer’s warehouse, the dropshipper will take the product from the warehouse and sell it to the customers. The retailer then makes a small profit from this sale. In return, the dropshipper will receive the wholesale discount from the retailer. Thus, the retailer makes both the seller and the dropshipper profit.
Understanding Drop shipping
However, there are some aspects about drop shipping that you need to know. For instance, if the drop shipper does not deliver the product to your customers’ homes then this will be considered as non-delivery of merchandise by the dropshipper.
Another aspect that you need to know is that the price of the product that the dropshipper provides to the retailers is always lower than what you are charging to your customers. Therefore, your profits are greatly reduced if you sell products at wholesale prices than the retail price that you are charging to your customers.
Some people question if drop shipping really works. However, if you have tried it out first hand then you will agree that it is an excellent way of running your online store. If you have more than one store and you sell several items at the same time, then you can start off with your own online store, which would give you more control and less work. compared to multiple stores.