If you are an internet retailer looking to expand your offerings without any additional outlay for inventory, you really should examine the drop shipping business model as a means to do this. The drop shipping business model is one where an entity (generally the manufacturer or wholesaler) makes a decision to allow retailers to order in quantities of as little as one item at a time – and further allows the retailer to specific a shipping address for each order. For the retailer, this means you can offer the entire line of products of one or more manufacturers/wholesalers without ever investing a penny in additional inventory. So instead of being able to offer just a few “best selling” items, you can now offer many more items. It no longer becomes important if an item sells really well or just occasionally as its cost to you now is just a slow on your web store. There are no holding costs like when you inventory items.
Let’s take a look at what the drop shipping business model is and how it works.
The easiest way to think about a drop ship business model is to think about your own retail web based or mail order business. In many ways they work the same. An order with payment comes in, is processed and then shipped to the purchaser. In both your retail environment and in the drop ship environment, the person receiving the package is your customer. The only difference to the customer is that in the one instance, the product is shipped directly from your location and in the other instance, the product is shipped from another location.