Since it’s inception, the Internet has brought us a number of exciting innovations, including the advent of a widely adopted business model known as Drop Shipping. The drop ship phenomenon has allowed business men and women to offer all kinds of products to a whole world of consumers without ever having to stock the first piece of merchandise.
The concept of drop shipping was neither born of, nor is exclusive to the Internet. Construction contractors, for example, would often enter into a special relationship with their appliance supplier to have a refrigerator, stove, and dishwasher delivered directly to the building site, long before the world became so widely webbed.
What the Internet has brought to the table, along with the proliferation of alternative shipping methods like UPS and FedEx, is the ability for an entity like a website to promote and sell a single product, with the wholesaler taking on the responsibility of shipping the item to a third party (who already has a massive shipping facility anyway). The sheer volume of traffic to the site generated from the Internet is what makes this business model economically feasible.
Simply put, the drop ship process consists of the merchant selling a product at retail to the consumer, then buying the product at wholesale from the distributor. The distributor then ships the product to the consumer directly from the warehouse. The wholesaler charges the merchant for the shipping costs, which can either be priced into the product or passed on to the consumer. The consumer remains the merchant’s customer, and the merchant is the distributor’s customer.
A local bike shop might open up other avenues of revenue by establishing an Internet presence to promote the brick and mortar site, while offering an expanded line of motorcycle jackets to an audience that would never visit the geographic location anyway.
Having a physical presence however, is by no means a requirement for becoming a successful drop shipper. Many if not most of the leather shops you will find on the Internet are drop shippers. Many of the products you find on EBay and other auction sites are also being drop shipped. Craigs list too!
So how does the Drop Ship model benefit the consumer? Low, deep discounted pricing! Drop shippers do have their expenses, but nothing like the rent, or the up front stocking of merchandise that a brick and mortar shop has to deal with.
Drop ship agreements vary between wholesalers. While the merchant is able to purchase product at wholesale, the price is usually not as low as the price offered a retailer that purchases in bulk. Some wholesalers will also charge the merchant a Drop Ship Fee, not on each item, but on the box regardless of the quantity of items shipped. This is the “handling” in the shipping and handling charges.
Another charge you might find from a drop shipper is a restocking fee. This also originates from the wholesaler and is often passed on to the consumer in the case of a straight return.
Even with these extra charges, there is plenty of room for the drop shipper to offer low Internet pricing to their customers, and still make a decent profit.
The Drop Ship business model has opened up a new tier of pricing for the consumer, and has allowed authorized dealers of leather to break away from local and regional confines. Anyone that has the mind to can become a drop shipper, and depending on the effort put into it, the potential to grow a thriving business is there.
That said, it is incumbent on the consumer to practice due diligence to avoid the unscrupulous merchant or the fly by night web site.