Drop shipment or (drop shipping) is a type of retailing where
the retailer does not keep goods in stock, but instead passes
the customer's order and shipment details to the wholesaler, who
then dispatches the goods to the customer directly. The retailer
makes their profit on the difference between the wholesale and
retail price.
Some retailers
may still keep "show" items on display in stores,
so that customers can inspect an item similar to those that
they can purchase. Other retailers may only provide a catalogue
or Internet presence.
Drop shipping
can occur when a retailer (who typically sells in small quantities
to the general public) receives a single large order for a product.
Rather than route the shipment through the retail store, the
retailer will arrange for the goods to be shipped directly to
the purchaser.
The book
selling industry provides an example. Book retailers typically
sell single copies of books to the general public. But a store
may receive an order for, say, 50 copies of a book from a company
that wishes to buy the books for their employees, clients, or
stockholders. The book retailer will arrange for the wholesaler
to deliver the books directly to the company.
Many sellers
on eBay also drop ship. Typically a seller will list an item
as new and ship the item directly from the wholesaler to the
highest bidder. The seller profits from the difference between
the winning bid and the wholesale price, minus any selling fees
from Ebay.
Yet another
version of drop shipping is the practice of using private freight
carriers to transport large volume items direct from the manufacturer
to a postal facility close to the location of the end recipients
(as opposed to dropping the items at a postal facility close
to the manufacturer). This practice is employed for purposes
of postal and time savings. An example is a magazine publisher
trucking all magazines addressed to subscribers in Miami directly
to the post office in Miami.
NOTE: Dropshipping
companies do not always offer wholesale prices. In order to
determine whether a dropshipper is a legitimate wholesale supplier,
pay close attention to the following:
Is a Tax Identification number required within the Dealer application?
-- The vast majority of established wholesale dropshippers require
either an EIN (Federal Tax ID) or Social Security Number.
Are prices already displayed to the public? -- Genuine wholesale
prices are never shown to the public.
Is a membership fee required? -- Most authentic wholesale dropshippers
will never require membership fees; those that do offer a full
refund after a certain number of inventory purchases are made.
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