Dec
8
What is Dropshipping?
Dropshipping is a relatively simple process that has been around for many years. The act of dropshipping occurs when a manufacturer and/or distributor sends a product directly to a customer on a retailer’s behalf.
How Dropshipping Works
Many manufacturers* do not sell directly to consumers, nor do they supply retailers. These manufacturers would rather use distributors to get their product to market. Distributors buy in bulk and then distribute the product to retailers.
In some cases, distributors prefer sending the products directly to consumers rather than sending them through the retailer. The retailer simply informs the distributor of the order and then collects a portion of the profit.
Here is a more specific example of how the dropshipping process works:
The ABC Widget Manufacturer manufactures widgets and then sells the bulk orders of widgets to a distributor for $10 per widget.
The ABC Widget Distributor sells the widgets that they purchased to select retailers/resellers for $15 per widget. Rather than sending the widgets to the retailer, the distributor fills widget orders on the retailer’s behalf, sending widgets directly to the customer.
The ABC Widget Retailer handles all of the product marketing and sells the widgets to the public for $20 each. Rather than keeping a stock of widgets on hand, the retailer orders widgets from the distributor as they are sold.
(*Note: In some cases, the manufacturer and the distributor are the same company. This is a very common occurrence.)
The Benefits of Dropshipping
Dropshipping benefits everyone by dividing the workload. Each party gets a piece of the pie without having to do all the work on their own. Here are the main benefits of dropshipping:
The Manufacturer: Dropshipping allows a manufacturer to get a product to consumers without having to retail the product. This allows them to concentrate on what they are truly good at— manufacturing.
The Distributor: The distributor has the best of both worlds. They can make money from a product without having to create or market anything. Another benefit for distributors is their narrow customer base. Selling to a select group of retailers is much easier than selling to the entire world.
The Retailer: When a distributor fills an order on the retailer’s behalf, it benefits the retailer in a variety of ways. For example, retailers are not required to have store inventory, there is minimal financial risk, and best of all, no merchandise handling is required.
Getting Started
Becoming a dropship retailer can be both easy and profitable. There are thousands of companies who are willing to share profits and ship products for you. If you approach the dropshipping process properly, you can begin a risk free online business that requires very little or no out of pocket expense.
