What is Drop Shipping?

By: LoydMartin

Drop shipping is a supply chain management framework in which the retailer does not store products in stock and to meet the requirements of its customers, it transports the shipments details and the orders of its customers to either a wholesaler, another retailer, or the manufacturer. From there, they make the shipment of the products to the customers directly. In this business model, the retailer does not have to ship the goods to the customers on their own, own a warehouse to store their goods, or even maintain inventory. This kind of supply chain management framework is really tempting as it terminates the requirement for the retailer to have a physical store, for instance, a warehouse or an office, rather all the work is done only by means of good internet connection and a laptop.

Drop shipping can be really advantageous as it is fairly simple to establish, almost costs zero dimes for the set up of the drop shipping business, massive running costs are not the concern of the retailer, there is minimal risk, this private label skincare business model is independent of any location and can be run from anywhere in the world, you can sell a vast range of products, you get to have more resources and time to scale your business, and last but not least, there is drastically lowered rate of losses on the goods that might get damaged during shipment.

However, drop shipping, like any other thing, does come with some disadvantages. In the drop shipping business, it can be tricky to manage the inventory, the degree of competition is fairly high, complications with the shipping can give rise to some problems, there is a lesser degree of control in the hands of the brand, in case something goes wrong; complete liability falls on the retailer, and last but not least, when compared to manufacturing or wholesaling; the profit margin is to some extent lower.

Drop shipping is used as a powerful strategy by many kinds of retailers and though it has its benefits, it can become a private label nightmare. So, it is important that you know all the problems that can come into being when it comes to drop shipping so that you can handle them properly and even avoid those problems altogether. Some of the major problems that can arise during drop shipping can include suppliers running out of stock, lower profit margins, the hassle of picking the right vendor, wholesale prices, and visibility and communication. These problems can be avoided if the retailer does proper and thorough research. A retailer should know the drop ship suppliers they are planning on working with including going through the reviews left by other retailers for that specific supplier, researching their past performance, and lastly, contacting the drop shipper to clear any ambiguities and getting answers to any questions you might have in mind. Although these steps can easily be overlooked by a majority of the retailers, it is essential to check these off your list to avoid all the drop shipping problems.

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