Dropshipping has become a very popular concept and many products are sold to customers with the help of this concept. Dropshipping is a supply chain management technique where a retailer does not keep the products they sell in stock. When you purchase a product from such a retailer, you will transfer the order directly to the manufacturer or wholesaler and the products will be delivered directly to you. Many people may not even be aware that they have purchased products that will be shipped directly. In this article, we will find out more about how dropshipping works and what you need to consider before selecting the right dropshipper.
Once a retailer receives an order from a customer, they will ship it to a wholesaler or manufacturer and then ship the products 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 that sell products with the help of a dropshipper will often keep display items in the store that the customer can inspect. These display items are often exactly the same or very similar to the product that will ultimately be delivered to the consumer. Some retailers may only provide a catalog or website from which the customer can select their product.
Sometimes retailers prefer to hide the fact that they will dropship products to avoid stigma. This is achieved with the help of ‘blind shipping’ where products are delivered without a return address. Retailers sometimes use ‘private label shipping’, in which case the merchandise will have the retailer’s return address even though it was shipped from somewhere else. Small businesses and online auctions use dropshipping a lot. Many custom products are shipped directly to the customer. Sometimes even retailers that keep stock end up shipping an order if it’s too big.
The main advantage of dropshipping is that it eliminates a lot of handling and inventory costs. Since a wholesaler or the manufacturer itself will pack and ship the products, many inventory and handling costs are eliminated. This leads to the customer getting the product at a reduced price. As with any other business, there are also risks involved with drop shipping. One of these risks is backorders. Once the retailer sends the order to the wholesaler, it may happen that the products are out of stock. This will mean that the customer will have to wait a long time to receive the merchandise. This will reflect negatively on the retailer. When you start a new business and select a dropshipper, you need to see what kind of availability guarantee the dropshipper provides. You should keep in mind that you are selling products without having them on hand. You need to be sure that the dropshipper will have the products available once you have sold them to a customer.
