What Is Dropshipping?

What is Dropshipping

Dropshipping is a type of retailing where, instead of the retailer (meaning you) actually keeping the goods in stock at their own location, they instead pass the order, along with the shipment details from a customer, to a wholesaler.  It is then the job of the wholesaler to dispatch the goods ordered directly to your customer for you.  The great thing about this method is that not only do you not need to have a large warehouse for storing all the goods you are selling, but also you make a profit through the price you pay for it wholesale, and the price that you sell it to your customer for.

In fact, where dropshipping is concerned, you are actually acting as the middleman for the product that your customer receives and the manufacturer who produces it.  This particular type of system is extremely beneficial to both small retail shops, as well as internet based stores, or those people who use mailing catalogs in order to generate sales for their companies.  In fact, many customers who purchase their products in this way seem to not be too bothered that there is a delay between the time when the products are ordered and when they actually have them arrive.

But the biggest problem that is being addressed by dropshipping is that retailers no longer have to worry about controlling their inventory, as this is done for them by the wholesaler instead.  Unfortunately, in a more traditional retail setting, the products a store owner orders will be ordered in bulk, and they will then need to be kept in a secure location until they can be displayed and sold.  What this means is that you are adding costs to an already large budget, as you will need to have storage space available, along with hiring staff to maintain the storage area and ensure that the goods are ready for delivery to the store and to know what levels each product is at.  You will also need to spend money investing in a good quality security system in order to prevent the goods from being stolen.  However, if you were to use dropshipping instead, then you do not need to retain a large stock of your inventory on site, and also you no longer needed to employ a large team of staff.

Also, you will find that a large number of manufacturers now find the idea of dropshipping as a good investment, as it is also lowering their costs as well.  Plus they are gaining an additional sales person who they do not actually pay a wage to.  They are also saving themselves money as they no longer need to arrange for the delivery of large quantities of their goods to a retailer, so they are cutting down on their handling and fuel costs this way.  Instead, they can use the more inexpensive shipping methods that are now readily available by using either UPS, FedEx or a locally based delivery company to ensure that their products are delivered directly to the customer.  Plus, as many manufacturers have spent vast amounts of money ensuring that their warehouses are completely secure, they know that their products are safe until the day that they are dispatched, rather than them sitting in the back room of some retailer’s shop with very little or no security on the property.

Yet there are some drawbacks to running a dropshipping business, and these we will look at in more detail later on in this book.  Through this book, we will provide you with how you need to get started in the business of dropshipping, along with what you will need and the benefits, as well as the drawbacks.