Drop Shipping

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. This means the seller never sees or handles the product.

How Drop Shipping Works:

Order Placement

The customer places an order on the retailer’s website.

Order Transfer

The retailer forwards the order details to the drop shipper or supplier.

Direct Shipping

The drop shipper then ships the product directly to the customer.

Advantages in Ecommerce:

• Low Overhead Costs: Since there's no need to invest in inventory or warehouse space, the startup costs are minimal.
• Wide Product Selection: Retailers can offer a broader range of products without the risk of unsold inventory.

Challenges and Mitigation:

• Quality Control: Since the retailer doesn’t handle the product, ensuring consistent quality can be challenging. Building a reliable relationship with trustworthy suppliers is essential.
• Customer Service Challenges: Handling returns and customer queries can be complex when the retailer doesn’t manage inventory. Clear policies and effective communication with suppliers are vital.

Strategic Application:

• Ideal for entrepreneurs starting an e-commerce business with limited capital.
• Useful for testing new markets or products without significant upfront investment.