Drop Shipping Explained: A Comprehensive Guide for Resellers

Drop shipping is a popular method used by online resellers, enabling them to sell products without holding inventory. In this article, we will delve into the intricacies of drop shipping, its benefits, and considerations for resellers.

Understanding Drop Shipping

Drop shipping refers to the practice where a reseller sells a product to a customer, and then the product is shipped directly from the supplier to the customer. This means that the reseller never physically handles the product, as the supplier takes care of shipping it. Let's break down the process:

The reseller purchases a product from a supplier for a lower price. The reseller sells the product at a higher price to the customer. The reseller sends the customer the order details to the supplier. The supplier ships the product directly to the customer.

This model eliminates the need for the reseller to hold or manage inventory, which can be advantageous for online businesses.

The Role of the Supplier in Drop Shipping

To start drop shipping, you must establish a relationship with a supplier who is willing to dropship. Some suppliers are open to this arrangement, while others are not. If you find a supplier who agrees to dropship, you can proceed with the sales process. For example, if the product is sold for $100, the reseller might buy it for $70 directly from the supplier and then sell it to the customer. However, it's important to factor in shipping costs and any currency exchange rates involved.

The Difference Between Drop Shipping and Selling Online

Many people confuse the terms 'drop shipping' and 'selling online.' To clarify, you can dropship online or sell products that you physically possess. Online drop shipping involves sourcing products from suppliers and selling them to customers without holding inventory. Selling online products that you own means you have the products in your possession and can control the shipping process.

Should You Consider Drop Shipping?

Your decision to engage in drop shipping depends on various factors. If you interpret the question correctly, the answer is yes, drop shipping is exactly what you described. In this case, a supply is someone who provides what you need, such as a plumber or electrician getting parts from a supplier.

However, if you are asking whether a manufacturer can ship directly to your customer, the answer is no. Most manufacturers do not offer drop shipping services. Instead, you might need to find a wholesaler to buy your inventory, which requires a significant initial investment. Although this approach may increase your upfront costs, you can often get better bulk pricing and avoid handling fees associated with drop-shipping services.

Another aspect to consider is shipping times. Drop shipping can sometimes involve lengthy processing times. For example, the drop-shipper you used might take about three days to process and ship the order. If orders are placed on Thursdays or Fridays, the item may not ship until Tuesday. This can lead to delays and potentially dissatisfied customers. With your own inventory, you have more control over shipping times and can offer faster delivery, leading to a better customer experience.

Lastly, with the rise of the pandemic, many people have turned to drop shipping as a way to earn additional income from home. This has created a highly competitive market, and while there are many opportunities, the profit margins can be thin or even non-existent due to the various costs involved in working with a drop-shipper.

Choosing whether to engage in drop shipping or traditional methods of selling online depends on your business goals, available resources, and target market. Each method has its pros and cons, and it's advisable to carefully consider these factors before making a decision.