What is drop shipping?

This is one kind of retailing in which the retailer does not need to maintain inventory of any goods. He merely transfers the orders he gets from customers to the distributor or wholesaler and it is the wholesaler who sends the ordered goods. For the retailer, it is the difference in the wholesale and retail tariff that makes up his earning. If you are one of those who wishes to embark on an online business, this method of business would be ideal for you.

There are many advantages of drop shipping which we will look at in this article.

No need for any investment on stock

The primary advantage is the fact that you need not invest in purchasing stock of any product to start selling them. You can display the products you want to sell on your website and the moment you get orders from customers, you can transfer them to the drop shipper who will go ahead and deliver the ordered products to the customer.

You will notice that there is thus absolutely no risk of buying something and hoping that you can sell them. You do not stand to lose anything since you have not invested any amount in the business and need not worry about customer demand influencing your business. Your start up costs is very low and the drop shipper bears all risk.

Delivery costs and hassles

The next advantage is that you need not bother about logistics of delivering the products ordered and can concentrate on your core competence, which is marketing your website. Fulfilling a customer order by arranging its delivery can be very time consuming in following up with the logistics provider, packing the goods etc.

Warehousing costs

As opposed to the conventional retail model, since there is no purchase of any material, there is no need to store them and take care of them in a warehouse. You thus save on real estate costs and manpower costs that you would have to employ to manage the inventory. These are very significant costs that can erode your profit margins and by avoiding them, you can save both time and money to focus on your strategy to market your website in an effective manner.

Can promote a variety of products

Drop shipping enables you to promote as many products as you want, since there is no requirement of stocking any product. You only need to display them on your website as product catalogues and through that can reach out to prospective customers.

You only have to ensure that you do not end up promoting diverse category of products and stick to your category. Promoting too many unrelated products will not help you carve out an identity of your own.

No compulsions of minimum quantity purchase

Perhaps the best feature of this kind of business is the absolute flexibility that you can enjoy in placing your orders with the drop shipper. There is no compulsion from his side on you placing an order of some minimum quantity and you are free to pass on customer orders as and when you receive them.

To summarize, drop shipping is thus something that you must definitely consider if you are looking at starting a small retail online set up. There is no undue pressure on your cash flow and you can build your business gradually over time.