What is Drop Shipping?
Drop Shipping is a supply chain term used to describe a technique that involves retailers. In drop shipping, retailers do not maintain any inventory. Orders for merchandise are sent directly to manufacturers and wholesalers, who then ship goods directly to the customer. Usually customers will pay for shipping in the checkout process online. Retailers then make a profit from the difference between the retail price and the wholesale price.
Small businesses and online auction sites also use drop shipping. Many manufacturers ship custom items to end customers that are initiated by orders from retailers.
Drop shipping can benefit businesses. Inventory is not needed, and shipping is handled by the manufacturer or wholesaler. This reduces costs on having to move the inventory from wholesaler to retailer and then ultimately to customer.
Below is an informational video clip on drop shipping.