What is Dropshipping?

Dropshipping is a tactic performed by retailers in which they do not carry inventory and sells inventory that is shipped directly from the wholesaler or manufacturer.

Wiki defines dropshipping as:
Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in retail businesses, the majority of retailers make their profit on the difference between the wholesale and retail price but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.
In the world of online stores and ecommerce operations, dropshipping has quickly become a way for retailers and store owners to increase product offerings without having to buy the inventory. Turnkey dropship suppliers have appeared on the market in the last few years offering thousands to millions of products that can be shipped directly to the purchaser, without a return name or risk of the customer knowing that the product did not actually come from the retailer.

Amazon.com and Ebay sellers alike have utilized this method since the inception of the Internet, but have grown with a massive force over the past few years.  Companies like DoBa have appeared in the market as a middle-man helping retailers partner ship dropshipping programs in several product lines.  Shopster, Worldwide Brands, Dropshipdesign, and SaleHoo are other dropship programs where retailers have looked to for sourcing products they can sell without purchasing.

In short, dropshipping an item online involves a very simple process.  (1) The retailer finds a wholesaler that has the products and is willing and able to ship it to customers on demand without letting customers know that the product(s) are coming from the wholesaler.  (2) The retailer post the picture of the item on Ebay, Amazon, or their own website.  (3) Once the sale occurs, the retailer buys the item from the wholesaler and the wholesaler ships it to the customer (the return address and information on the package is usually that of the retailer).  That's it!!  The product has now been dropshipped to the retailer.  The graphic within this post explains the process if you are receiving payments via Paypal.

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Author: Nicholas Coriano

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