What is Dropshipping?

The basic concept of dropshipping is simple. A manufacturer makes a product. That manufacturer or the distributor employed by that manufacturer will stock the product and maintain the inventory in a warehouse. When you, or another online seller or retailer, sells a product online or by catalogue, the manufacturer or distributor acts as the dropshipper, shipping the product to your client as if it came from you. Your label, company name and invoice with company logo will be included in the shipment. You look like a much bigger company than you are and one with warehouse space and inventory. In fact, you are not paying for the warehouse rent or the truck to deliver the product. You do not have to arrange for the freight shipment by plane, train or truck. All you have to do is sell the product.

It is important to understand that some dropshippers require that you sell a minimum amount of stock per month or quarter. This ensures that they can move their inventory and that they are not paying warehouse prices to store inventory for long periods of time. They can then stock and sell new items or new versions of products as they are released. If all goes well, you make money and so do they.  

When you choose a dropshipper, you have to look at the going rate for the product you sell and figure out whether you can afford to undercut the prices offered by your competitors and still make a profit. If you are paying too much for the drop ship service, you will not make any money. Remember, you have to pay the dropshipper bill and still be able to charge enough money on the product to make a profit.

To find a reputable dropshipper, you can use one of several directories. You buy the directory or a subscription to the directory, so you can receive updated copies as they are published. Use the directory to find and compare dropshippers and, as new services are made available, to compare your current dropshipper to competitors.  Some dropshippers directories focus only on certain types of dropshippers who offer products and shipping services for a certain type of product, e.g., books, DVDs or other media.  

Find the right dropshipper with the right products and services and the right pricing structure and you can significantly improve your sales and service to your clients.