Drop shipping is known as supply chain management technique. In drop shipping retailer don’t keep goods in stock and only deliver information about customer’s orders and shipping detail to wholesalers and manufactures. As we know that in retail business retailers makes profit on price difference between wholesale while some retailers earn profit on percentage. In our article we are going to tell the procedure of Drop shipping and all the risks and benefits if it.
Many retailers keep “Display items” on their display stores. This helps customers in inspecting items they are looking for and want to buy. While many retailers only provide website of their product or catalogue. Those retailers who only show their ship merchandise from wholesaler will hide the fact. It is achieved through “blind shipping”. It is shipping merchandise without having return address or any private label. Customized slip of packing might also be included by wholesaler which contains the name of retailer’s company, logo and contact number.
- Small Business
Drop shipping occurs when a person having small business who sells in small quantity. It occurs when a small retailer receives single large order of product he is offering to general public. In spite of route the retailer, make possible for shipment goes directly to the customer. Drop shipping is also much beneficial in big items like steel buildings. In which retailer takes deposit of shipping steel building from supplier’s manufacturing site to buyer’s building site.
There are many sellers who drop ship via online auctions from sites like, eBay. In it seller make a list of item and directly ship the item to wholesaler from retailer who makes highest bid. There are huge numbers of population who use such sites for drop ship. Many companies are emerging in market that is providing drop shipping service to both companies and also on individual base.
- Benefits and Risks
Benefits of drop shipping are upfront inventory and positive cash-flow cycle. It occurs when seller paid when the purchase is done. Seller pays money through credit card or credit terms. The period also comes in which seller has got the money but has not paid it to the wholesaler. One more benefit is that by drop shipping one can eliminate duplicate efforts. This helps a lot in reducing shipping cost and inventory management.
If we talk about risks then there are also some risks present in drop shipping. One of them is backordering can occur in drop shipping when seller place its shipment request with wholesaler but the product is sold. Another risk is that any scam artist can promote drop shipping as work at home opportunity. In that sense there will be risk of item and shipment orders. One more risk is of middleman as it can charge you little profit margin.