What Is Drop Shipping? (Video 2/10)

Have you ever heard of drop shipping? If not, don't worry because we have got you covered. In this article, we will be discussing what drop shipping is and how it works.

What is Drop Shipping?

Drop shipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.

How Does Drop Shipping Work?

Here are the basic steps involved in drop shipping:

1. The customer places an order on the retailer's website.

2. The retailer forwards the order to the supplier.

3. The supplier ships the product directly to the customer.

4. The retailer makes a profit on the difference between the wholesale and retail prices.

Advantages of Drop Shipping:

1. Low Overhead Costs: Drop shipping allows businesses to operate without the need for a physical storefront, inventory or warehouse space. This means that there are no rent, utility or storage costs to worry about.

2. Flexibility: Since there is no need to keep inventory on hand, businesses can offer a wider range of products without the risk of overstocking.

3. Scalability: Drop shipping makes it easy to expand your product line or business without having to invest in additional inventory or staff.

Disadvantages of Drop Shipping:

1. Lower Profit Margins: Due to the lower overhead costs, the profit margins are typically lower in drop shipping compared to traditional retailing.

2. Lack of Control: Since the retailer does not handle the product, they have no control over the shipping process or the quality of the product being shipped.

3. Shipping Issues: Delays, lost or damaged packages can cause customer dissatisfaction, which can be detrimental to the business.

Drop shipping is a popular retail fulfillment method that offers advantages such as low overhead costs, flexibility, and scalability. However, it also has its disadvantages such as lower profit margins and lack of control. If you are considering drop shipping as a business model, it is important to carefully weigh the pros and cons before making a decision.