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Drop Ship Wholesale

Drop shipping is where the seller does not keep any goods in stock. The seller in drop ship wholesale transfers any customer orders to the manufacturer or wholesaler. The wholesaler supplies and ships the goods directly to the customer. As in any retail business, the seller makes a profit on the difference between the wholesale and retail price. In some cases the seller earns an agreed percentage commission of the retail price to the customer.

1. Benefits

Three benefits of drop ship wholesale are potential reduced costs to customer, the elimination of upfront stock and the positive cash flow for the seller.

Since the wholesaler will pick, pack and ship the goods the seller doesn’t need stock, there’s no need to repackage, relabel, etc.  The seller also doesn’t pay additional shipping costs from the wholesaler to their premises. These cost reductions can be used to reduce the price to the final customer.

Positive cash flow occurs because the seller is paid when the purchase is made. If the seller pays using a credit card or credit terms there is a period where they have the customer’s money, but haven’t paid the wholesaler. This means they can start up the business with little or no money.

2. Risks

Drop ship wholesale however does present risks such as backordering which is when a seller places an order but the products out of stock. This could result in a long wait before the wholesaler receives new products, and reflect badly on the seller. A good wholesaler will keep their sellers updated, but it is the drop shipper’s job to be aware of the order level of goods the wholesaler has available.

Drop shipping has also featured in some internet-based home business scams. Unscrupulous individuals can promote drop shipping as a lucrative “work from home opportunity. The person who buys into this scam is often sold a list of businesses from which drop-shipment orders can be placed. These businesses are not wholesalers, they are businesses or individuals acting as middlemen between sellers and wholesalers. With no product of their own to sell they often charge high prices. This leaves little profit margin for the seller, and they charge a fee for the continued use of their services.

More Web Advice – Drop Ship Wholesale

Drop Shipping Basics