Drop shipping
Drop shipping is a retail fulfillment method that allows an online store to sell a product even when it does not carry any inventory.
Instead, when an order comes in, the retailer purchases the product from a third-party supplier — be it a wholesaler or a manufacturer — and has it shipped directly to its customer.
Without seeing or handling the product directly, the retailer makes money by selling the item at a price higher than its cost, which is normally determined through a market survey in which he trawls through popular e-commerce sites.
Such a method, while still relatively new in the e-commerce world, is becoming increasingly popular among online business owners.
For one thing, drop shipping significantly reduces the upfront costs of setting up an inventory system. This means e-commerce retailers can simply run their business out of their homes, with just a laptop.
They also do not have to deal with the hassle of packing and shipping orders, tracking and managing inventory, or handling returns or inbound shipments.
Early adopters of the practice include US retail giants Macy’s and Home Depot, which have used drop shipping to offer their customers a much wider range of products and sell bulky items that typically take up large amounts of space in stores and warehouses.
But there are some disadvantages to drop shipping. Some buyers may buy a variety of products that are sold by different suppliers, which means the retailer will have to incur separate shipping costs for each item. Passing on all of the shipping costs to the buyer may not always be possible as the retailer may be seen to be overcharging its customers.
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