According to ecommercefuel.com, “Drop shipping is a fulfillment model that allows you to buy products individually from a wholesaler and ship them directly to your customer. Instead of purchasing a large amount of inventory, you simply partner with a drop shipping supplier and list their merchandise for sale. Then, once you receive an order you forward it to the supplier for fulfillment. The supplier will ship the product directly from their warehouse to your customer, and charge you only for the price of the shipped item.”
So, it is a type of shipping where you send products directly to your consumers. It has many benefits.
Lower Capital Requirement: With drop shipping, you don’t need to invest thousands of dollars in inventory. Instead, you only purchase a product when you have an existing order to fill.
Wider Product Selection: When you don’t have to pre-purchase all the items you sell, you can offer a significantly larger number of products to your customers.
Reduced Risk: Without thousands invested in inventory, the risk involved with starting an online store is dramatically reduced. If things don’t work out, you aren’t stuck with thousands in inventory you have to sell at a loss.
Location Independence: Because you don’t have to worry about fulfillment or running a warehouse, it’s possible to run a drop shipping business from anywhere with a laptop and an internet connection.
Highly Scalable: Because you don’t need to manually fulfill each order, it’s relatively easy to scale a drop shipping business.
It is easy to make a lot of profit through drop-shipping. “like all businesses, profits and success range widely based on a number of factors – most notably, the commitment and dedication of the business owner and the niche selected. But with a long-term commitment, hard work and the right approach it’s possible to create a drop shipping business that provides a six-figure income.”
But it is a process that takes time, “A business of this scale will take time to build – likely years – but it’s definitely possible. And once a drop shipping businesses is up-and-running, it’s fairly straightforward to automate and/or outsource most of the day-to-day aspects of the business.”
The profit margins will differ depending on the products, Profit margins will vary greatly depending on the products you sell. For expensive electronics, margins are thin and will likely be in the 5% to 10% range. But for low-priced accessories, margins will often be in the 100% range.
Margins will also vary. Your margins will also depend heavily on your ability to offer value to your customer, which allows you to charge a premium price over your competitors. This is instrumental to the success of a drop shipping business.
What is really nice about drop shipping is that it is worldwide. “People sell drop shipped products just about everywhere! Many sales on eBay and Amazon are fulfilled through drop shippers, as are items on thousands of eCommerce sites, especially smaller ones.”
“And even the big boys utilize drop shipping to expand their product catalog and offerings. It’s likely that large companies like Sears and Home Depot utilize the drop shipping model for some of their less popular items. This allows them to offer a broad selection while limiting the inventory they have to maintain.”
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