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Drop Shipping
September 19, 2008
Drop shipping is a product delivery method in which the seller (retailer) accepts payment for an order, but the customer receives the product(s) directly from the manufacturer. In a drop shipping arrangement, the retailer acts as a middleman between the manufacturer and the customer.
How it works:
Drop shipping has been used extensively by companies such as Amazon.com to build up thriving online businesses that require little or no initial investment in terms of inventory. What happens is that you as a retailer set up a Web site that sells products. When a customer buys a product, they pay you for the product along with any shipping costs (example: product costs $50 with $10 shipping). You then notify the wholesale distributor with the pertinent information. The distributor packages it, sends it to the customer with your label on it, and bills you the wholesale price for the product plus shipping (example: wholesale cost $25 plus $5 shipping). You make a 50 percent profit for your efforts.
Many manufacturers also embrace the idea of drop shipping, because the retailer essentially becomes an additional salesman. Delivering large orders or bulky items to a retailer costs money in handling and fuel. With drop shipping, the manufacturer can use inexpensive shipping methods (UPS, FedEx, local delivery companies) to get the ordered product to the customer directly. Manufacturers also own much more secured warehouse space than most retailers, so their products remain safe until ordered.
Posted by Shanu Singh Guliani on September 19, 2008 | Comments (0)
