The Basics of Drop Shipping
By Gary Granai
Here is how drop shipping is typically explained:
"Drop shipping" is simply an arrangement between you and the manufacturer or
distributor of the product you sell whereby the manufacturer or distributor -
NOT YOU - ships the product to your customers.
Here's an example: Let's say Mary wants to set up a web site that sells skin
care products. Instead of filling her basement with cases and cases of stock, and
then going downstairs each time an order comes in, Mary puts together a drop shipping
arrangement with a manufacturer who ships the products to her customers directly.
And the best part is that the manufacturer will happily ship the products using
shipping labels with Mary's company name, address , and logo instead of their
own. The product arrives at the customer's house a few days later, and they
never know that the product wasn't shipped directly from Mary's warehouse!
Let's say Mary has a product called the "Total Skin Care Package," priced at
$97. A customer visits her site, places an order, and is billed $97 plus $11 for
shipping and handling.
Mary then sends the manufacturer an e-mail with her customer's order and shipping
information. The manufacturer packs up the customer's order, puts Mary's shipping
label on the package, and mails it out via UPS or FedEx, usually within 48 hours.
The manufacturer then bills Mary for the WHOLESALE price of the "Total Skin Care
Package" -- in this case $64 plus $11 for shipping and handling. Since Mary has
passed the shipping and handling fee on to her customer, she has just netted a
profit of $33. and all she had to do was send her manufacturer an e-mail!
Drop Shipping Advantages
There are a few huge advantages to this model. First, it SAVES YOU THE COST of
building your own inventory. If you're like most people starting a small business,
you don't have a ton of extra money lying around. The last thing you want to do
is tie up your cash in inventory that you may or may not be able to sell.
No inventory also means no leftovers. If the product you sell suddenly becomes
outdated, obsolete, or just plain un-trendy, you aren't the one with a house
full of stock that nobody will buy. Many on line retailers find themselves
having to offer deep discounts - and taking huge losses - on old products just
to get them out of their homes to make room for more inventory!
You'll also be able to SKIP THE HASSLES of shipping your products. Unless you've
already set up a shipping account with someone like FedEx or UPS, you'll be heading
down to the post office every day to buy stamps and mail out your products.
And you'll be able to ADD NEW PRODUCTS ALMOST INSTANTLY. Since you don't have to
worry about ordering inventory, you can add products to your web site within a
few hours. If you find that your customers are eager to buy a certain product,
you can have that item up on your site in almost no time.
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