The concept of drop shipping has now picked up momentum reaching the midst of growth curve, fuelled by internet commerce.

Manufacturers and retailers are seeking new ways to enrich their business. Due to cost constraints, they prefer to do business with little or no investments. Drop shipping is a process, wherein goods can be shipped directly from the manufacturer to the consumer.


Drop shipping is a supply chain management technique where the retailer does not keep goods in stock. The customers orders are transferred to the manufacturer of wholesaler, and goods are shipped from them directly to the customer. In this process, the distributor takes care of the shipping part on behalf of the retailer. The retailer dos not order stock in bulk. Instead, the stock remains with the distributor, and when a sale is made, the merchandise is packed and sent directly to the customer with the retailers label on the box. A sample item of merchandise will be displayed on the store shelf, or pictured in the catalog, or website, while the actual product purchased will be in the warehouse of the manufacturer many miles away.


Drop Shipping: how good is it for retailers?

Benefits for Retailers:


In traditional retailing, retailers order products in bulk from the manufacturer, and keep them in the store until it is displayed. This requires maintaining a proper storage area, hiring staff to handle the stock, and investing in security measures to avoid the products being stolen. With drop shipping, the retailer does not have to keep any inventory, or get involved in packaging, and paperwork. He accepts payment for an order, and the customer gets the product from the manufacturers. The role of the retailer is that of a middleman; interacting between the manufacturer, and the customer. The difference in the wholesale and retail price is the retailers profit margin.


More retail space: The space primarily allotted to storing can be used for displaying. Even small shops can offer exotic products without cost concerns, and expensive storage facilities. Shipping process would be handled by professionals and more retail space would be available. Less number of employees will be needed for handling the stock.


Low risk: By adopting this process, retailers can minimize their risk, as less or no investments are required for warehouses, and inventory. There is always a risk of trends going obsolete. So retailers have the pressure of selling the merchandise before the fad fades out. But with drop shipping, risk of merchandise going out-of-fashion is not there, as the retailer does not keep possession of the product. Instead he enjoys the opportunity of selling the latest items that are more in demand thereby acquiring good profit margins.


More options: Retailers can keep more options and sell a wide assortment of products. They can sell any product available with their drop ship wholesaler, as they do not have to buy and keep the stock. This helps them to sell even expensive items, which they would not opt to, if they have to buy and stock the product.


Boon for small retailers: This process is beneficial to all retailers and more beneficial for small retailers, online stores, and for those retailers who depend mainly on catalogs for their sales. There may be a small time gap between the ordering and drop shipping time, but the customers do not mind it, as they do not expect to walk out with their purchases.


Benefits to manufacturers:


The process has manifold benefits. Many manufacturers also opt for drop shipping as; the retailer becomes an additional salesman for his product. They enjoy benefits of reduced shipping costs, and more sales exposure to their products. Here, the manufacturer can use inexpensive shipping methods,and local delivery companies. As manufacturers have more space than retailers generally; the products would also remain safe.

Constraints:


Nothing in this world is an unmixed blessing. Drop shipping, despite of all positive points, do have a few hitches. Some manufacturers protest against drop shipping. Main shipping and receiving systems may experience bottle-necks as time would be spent in processing and shipping individual orders. Some manufacturers only deal with bulk orders from retailers, which make it difficult for small retailers to custom orders, only for a few items. Under these circumstances, the customer will have to bare the shipping costs, and also the retail price.


Drop shipping helps the retailer to enhance his business to new heights. Only, concern might be taken to select a right drop shipper.


References:


1.      wisegeek.com

2.      dropshipperspath.com

3.      dropshippingessentials.com

Image Courtesy:


1.      dropshipstrategy.com

2.      dropshipaccess.com

3.      dropshipchina.info

4.      dropshipping4idiots.com