What is Drop Shipping?
Drop Shipping can be easily explained with the help of an example where a retail merchant post a product on his or her website and customer places the order on a retailer’s website where as the retailer in turn place order with the wholesale supplier of the product who sends the same product to the address provided by the retailer. For example a you are a retailer and saw a website selling digital camera in $200 with delivery charges. You upload the digital camera picture and specifications on your website with a price tag of $300. A customer visits your website and finds it as a great offer and places the order of digital camera on your website. You after receiving the order from the customer place your order with the supplier and provide the shipping address of your customer and hence earn straight $100 out of this deal. There are wholesalers offering branded packaging of the product you have ordered so your customer will never know that you actually drop shipped the product at their doorstep. In most of the cases the wholesalers in the case of drop shipping remains anonymous and sends the invoice number and the tracking number to the retailer after placing the order.
The Basic Drop Shipping Model
There are three simple steps in a basic drop shipping model and these steps can be listed as below:-
- In the first step the customer places and order at your website and pays you the retail price of the product at your online store
- You place the order at wholesaler or supplier website and pay the wholesale price
- You keep the profit with you that is the difference between the retail price and the wholesale price
- Supplier ships the product directly to your customer at the name and address provided by you