What Is Dropshipping? Some Information

Dropshipping has become a very popular concept and lots of goods are sold to customers with the help of this concept. Dropshipping is a supply chain management technique where a retailer does not keep the goods he is selling in stock. When you buy a product from such a retailer he will transfer the order directly to the manufacturer or to a wholesaler and the goods are then delivered directly to you. A lot of people may not even be aware that they have bought goods that will be dropshipped. In this article we will find out more about how dropshipping works and what you should consider before selecting the right dropshipper.

Once a retailer receives an order from a customer he will forward this order to a wholesaler or to a manufacture and they will then ship the goods directly to the customer. As with any other retail business the retailer makes his profit from the difference between the wholesale and retail price. Retailers who sell goods with the help of a dropshipper will often keep show items in the store which the customer can inspect. These show items are usually exactly like or very similar to the product that will finally be delivered to the consumer. Some retailers may only provide a catalogue or a website from which the customer can select his product.

Sometimes retailers prefer to hide the fact that they will be dropshipping the goods to avoid stigma. This is achieved with the help of ‘blind shipping’ where goods are delivered without a return address. Sometimes retailers will use ‘private label shipping’ in which case the merchandise will have the return address of the retailer even though it shipped from somewhere else. Dropshipping is used a lot by small businesses and in online auctions. A lot of custom products are dropshipped to the customer. Sometimes even retailers who keep stock end up drop shipping an order if the order is very large.

The main advantage of dropshipping is that it eliminates a lot of handling and inventory costs. Since one wholesaler or the manufacturer himself will be packing and shipping the products a lot of handling and inventory costs are eliminated. This leads to the customer getting the product at a reduced price. As with any other business there are risks involved with dropshipping as well. One of these risks is backordering. Once the retailer forwards the order to the wholesaler it may happen that the goods are sold out. This will mean that the customer will have to wait a long time to receive the goods. This will reflect badly on the retailer. When you are starting a new business and selecting a dropshipper you should look at what kind of availability guarantee the dropshipper is providing. You need to keep in mind that you are selling goods without having them on hand. You need to be assured that the dropshipper will have the goods available once you have sold them to a customer.