A Basic Overview Of Drop Shipping

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For consumers around the world, buying product online is something we do on a regular basis. Online shopping is easy and convenient, and with the constant development of new securities, it is increasingly safer and more secure. Why go through the hassle of driving to a store when you can get what you need from the comfort of a computer chair? In fact, every year during the holiday season, online sales increase dramatically. In 2008, online sales of sport and fitness products increased by 18% over the previous year.

With online shopping as an easy and convenient resource, most of us don't think about what goes on behind the scenes of an online retailer. Many of these types of retailers and online auction sites use a supply chain management technique called drop shipping. Drop shipping is a technique in which the retailer does not keep the goods it sells in stock, but instead transfers the details of the order and transaction to a wholesaler or manufacturer. The wholesaler or manufacturer will then ship the product directly to the consumer. Like any retail business, the retailer makes a profit on the difference in price between the manufacturer's price and the sale price. Drop shipping, however, is not exclusive to online stores. Many catalog retailers use this method as well.

Drop shipping may also be an option for smaller retail businesses with a regular stock. If the smaller business, which normally keeps small quantities of product, receives a large order and does not have enough of the product in stock, they may have the manufacturer ship the product directly to the consumer.

As mentioned before, the drop shipping method is often used by sellers on online auction sites. Sometimes when a product is listed as new, the seller will have the item shipped directly from the manufacturer to the winning bidder. Profit is made on the price difference between the winning bid and the manufacturer's price, minus any fees from the auction site.

Manufacturers who specialize in drop ship products may also offer customized product for retailers. This is sometimes referred to as private label drop shipping. Private label items might include items like t-shirts or key chains with custom logos.

Many retailers rely on drop shipping because of the financial benefit of having no upfront inventory to purchase, which reduces total inventory and shipping costs. As long as the retailer keeps track of the manufacturer's inventory, drop shipping can also be very beneficial and time saving for the consumer as well.


About the Author:
3xp Web Solutions (http://www.3xpweb.com) is online company specializing in e-commerce opportunities. 3xp Web also specializes in hosting e-commerce websites. Art Gib is a freelance writer.



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