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Drop
shipping seems like a gift from heaven to all Internet marketers. What actually
is drop shipping?
It is a concept that has taken the online society by rage. It is a type of
merchandising system. In drop shipping, the retail seller does not keep an
inventory of the goods sold. When an order is received, the retailer passes on
the order and shipping details to a wholesaler. The wholesale merchant in turn
dispatches the shipment to the customer directly. The retail seller’s earns the
difference between the prices of the wholesaler and the retailer.
Sometimes a regular seller also gets involved in drop shipping. Take, for
instance, a merchant selling jackets. Usually there is a sale of one or two
items across the counter. Now suppose this merchant receives a bulk order of 100
jackets by a firm for its employees. Instead of getting the goods and then
supplying to the customer, it makes more sense for the retailer to simply route
the order directly from a wholesale merchant to the customer.
With the advent of the online revolution, the Internet has become the perfect
environment for the phenomenon of drop shipping. Previously, the retailer
had to keep a few items on display. This helped the customer get an idea about
the goods sold. A catalogue providing the details of the items may also be
circulated. Now it is very easy to provide information to a potential customer.
The retailer just publishes the catalogue, pictures and other details like price
and shipment costs on a website. The customer can comfortably access the
information from the privacy of his home. He goes through the online details and
chooses an item. The order is placed and the payment made online. The retailer
then notifies the manufacturer to dispatch the item at the shipping address.
Many sites like eBay make use of drop shipping. The seller lists the item on
the website. Many potential customers make a bid for the item. The order
goes to the customer who has quoted the highest price. The seller then arranges
for the wholesale supplier to ship the article to the customer. The seller’s
profit is the difference between the wholesale price and the highest bid. The
seller also may have to pay some fee to the website for the Internet presence.
Drop shipping has many advantages
The seller need not keep the items in stock. This helps the seller
immensely as he saves on two accounts. As he need not purchase the items in
advance, there is no inventory cost. Since there is no inventory, he does not
need a storage location. Hence, the storage cost is saved.
There is no risk involved. The order is placed to the manufacturer only after
the customer makes the payment.
There is a saving in shipping costs. The cost of sending the item from
the manufacturer to the seller and then to the customer would be higher. It
would be more economical to dispatch the article directly from the whole seller
to the customer. Apart from money drop shipping also saves a lot of time.
Like any other enterprise, drop shipping too has its share of risks. It
is advisable that the drop shipper ensures a few important points.
One of the major risks in drop shipping is back ordering. On receiving an order,
the seller instructs the wholesaler to dispatch the item. Now the whole seller
finds that the order is not available with him. Such a situation is called
backordering. A wise seller must keep constant contact with the manufacturer to
keep a tab on the situation. In addition, he must keep a few alternate lines of
action open in times of such crises.
It is better to market an item that is much in demand. An uncommon item,
however cheap, may not bring in successful business. It pays to do some market
research and find out the items in demand.
The seller should start with a few items in the beginning. On achieving
success, the business can be expanded to include mote items.
Choose a drop shipper with care. The manufacturer should be the genuine
article. The antecedents should be checked before getting into any business
deals. It pays to get a view of other sellers. Its better to be safe than sorry.
Years ago manufacturers were hesitant to transact with small online businesses.
Many still only deal with multi-million dollar orders.
For a complete guide to all wholesalers, drop shippers and volume discounters-
see our recommendation below:
We
recommend SaleHoo for the complete guide to all the Best
wholesalers including
small business Drop Ship, Light Bulk, Volume Discount, Liquidation and
Import! |
