| Drop shipping is 'a type of retailing where the retailer | | | | hand, if a drop shipper takes care of product |
| does not keep goods in stock, but instead passes | | | | fulfillment for you, you're automating the process of |
| the customer's order and shipment details to the | | | | shipping the products, and you can focus on your |
| wholesaler, who then dispatches the goods to the | | | | core competency - marketing your business to bring |
| customer directly.' [Source: Wikipedia] The retailer | | | | in more customers. This is another great advantage |
| then keeps the difference between the wholesale | | | | of using drop shipping as your business model. |
| price and the retail price. If you're planning to start an | | | | No Need For Warehousing |
| online retail business, drop shipping may be just the | | | | Since you do not need to purchase a huge inventory |
| option for you. | | | | of stocks from the drop shipper, there's no need for |
| Let's review the process of drop shipping, and | | | | warehousing costs as well. |
| analyze the advantages that the drop shipping | | | | This is highly advantageous if you consider this |
| business model has over the others. | | | | opposite scenario: If you rely on the usual wholesaling |
| No Upfront Payment | | | | business model instead of drop shipping, you need a |
| First of all, you do not need to pay upfront for a | | | | location to store your products after purchasing your |
| stock of products before you can start selling. With | | | | initial stock. Depending on the space you need, your |
| drop shipping, you can simply get into business by | | | | monthly warehouse rental costs can cut into your |
| displaying the products you want to sell on your | | | | profit margin significantly. You may even be operating |
| website, before you've actually purchased any of the | | | | your business at a loss. Why not let the drop shipper |
| goods. After you've received your order via the | | | | stock the products at their warehouse until your |
| internet, you can then forward the order to the drop | | | | customer makes a purchase instead? |
| shipper, usually through email, who will then deliver | | | | Flexibility Of Product Catalogue |
| the products to your customer(s). | | | | With drop shipping, you have the choice of promoting |
| In essence, this is the reverse process of normal | | | | any number of products you want on your website |
| retailers. You actually 'sell high' first before 'buying | | | | catalogue. Since you do not need to make upfront |
| low'. Since you're not making a huge upfront | | | | capital investments, you have the flexibility of |
| down-payment for your products, you're not bearing | | | | promoting as many products as you want, as long as |
| any risk at all. There isn't a risk of purchasing | | | | the products are all related to the category of |
| thousands of units of a product, and realizing that | | | | products you sell. |
| you're not able to sell them because the consumer | | | | However, it's essential to strike a balance between |
| demand is insufficient. | | | | the range of products you have, and the 'product |
| Thus, by not needing to make an upfront payment | | | | focus' of your business. Your business should focus |
| to stock products, you're benefiting in two ways. | | | | on a single category of products - you cannot be a |
| One, the drop shipper bears all the risk for you. If | | | | supplier of everything to everyone, like Wal-Mart. Be |
| the products are not in-demand, it's the drop shipper | | | | sure to include only the products you think are |
| who is potentially making a loss, not you. Second, | | | | related to your core 'product focus', and avoid |
| your startup costs are extremely low. All you need | | | | promoting too many unrelated products on your web |
| to invest in your drop shipping business is an initial | | | | catalogue. |
| deposit or down-payment, to demonstrate your | | | | No Minimum Quantity Restriction |
| commitment to the drop shipper, and also ongoing | | | | The last advantage of drop shipping is that most |
| web hosting fees and advertising fees. This is a huge | | | | drop shippers do not impose a minimum quantity |
| difference from retailers who have to invest on a | | | | order. When your customers place orders at your |
| fortune to purchase huge stocks of goods to get | | | | website, you can forward your orders to your drop |
| into business. | | | | shipper one-by-one. Most drop shippers do not have |
| Product Delivery Taken Care Of | | | | a problem with that. Thus, drop shipping is very |
| The second feature of drop shippers is that they | | | | beneficial for your business because it offers the |
| take care of the products delivery and shipment for | | | | greatest flexibility. |
| you. This is highly advantageous if you're just starting | | | | In conclusion, drop shipping is definitely an option you |
| out in business because you can focus all your time | | | | want to consider if you're planning to start an online |
| and efforts on marketing your business, instead of | | | | retail business without all the hassles of inventory and |
| worrying about order fulfillment or delivery. | | | | product delivery. If you evaluate the above |
| Order fulfillment can be a very tedious and | | | | advantages carefully, you'll realize that drop shipping is |
| time-consuming process if your monthly orders | | | | undoubtedly a viable option for the small-business |
| number in the hundreds or thousands. You need to | | | | retailer. Large retailers, on the other hand, will have |
| spend tremendous amounts of time keeping track of | | | | enough resources like capital to use the wholesaling |
| your inventory, packaging the products and shipping | | | | model for their business. |
| them to your customers individually. On the other | | | | |