What is Drop Shipping

You might ask, what is drop shipping? Drop shipping is a technique used by many retailers that does not involve keeping goods in stock, unlike most retailing businesses. Instead, drop shipping entails giving the customer's orders and shipping details directly to the manufacturer so that the supplier will be the one to send the items directly to the consumer. Sounds pretty easy for the retailer, right?

What makes drop shipping really attractive for retailers is the fact that it is a hassle-free way to earn profit. The retailer generates profit by the difference between the retail price and the wholesale price. The retailer can either display their items in their stores, or they can provide a catalogue of all available items to their customers instead. In other words, the retailer acts as some sort of middleman between the customers and the manufacturers. This is a technique that is widely used in online auctions nowadays, especially eBay.

What are the advantages of drop shipping? Drop shipping has a number of advantages for small retail companies that want to earn income by selling different items. Drop shipping companies are the ones that already provide a list of items with prices that are going to be sold. Retailers only need to find a method to sell these items in any way that they wish. The retailers even get to decide on how much they want to profit from the business.

The drop shipping company only considers the item sold once the product is sold by the retailer to a customer. The retailer does not need to pay for unsold items anymore. Also, the packaging costs are shouldered by the drop shipper, since they are the ones who ship the items, anyway. Shipping fees are shouldered by the customers, and the drop shippers hide their return addresses so that the customer thinks that the package was shipped to them by the retailer himself. The retailer can even send labels and fliers to the drop shipper to be included in the packages to be shipped. These private labels contain the retailer's name, contact details, and logo, so the customer really thinks that the package came from the retailer.
There are also no storage issues on the part of the seller, since the drop shipper is the one who keeps the stock of all items. In short, the seller only has to focus on selling the items and nothing else!

This might sound too good to be true, so what are the disadvantages of drop shipping? As a seller, you have to find a drop shipping company that you can trust, because any damaged or low quality item that is sent to your customer will badly reflects on your business. Therefore, make sure that the drop shipper that you are dealing with has a good reputation before you start making business with them. Also, you may have lower profit margins when you deal with small drop shipping companies.