Drop Shipping
Drop shipping (also known as drop shipments) is used in the buying and selling processes by both individuals and companies. Here, somebody sells a product to somebody else and takes payment for it. They do not, however, keep the product in stock themselves but sell on behalf of another company (usually a wholesaler). So, when they take an order for a product they then tell the wholesaler what to send out and where to send it. They then will pay the wholesaler for the product.
People make money here by applying a mark-up to the wholesale price which makes up the cost they charge to their own customer. So, for example, say you sell on behalf of a wholesaler who will drop ship clocks for you at a wholesale price of £10. If you charge a customer £15 per clock then you will pay the wholesaler £10 and the other £5 will be your profit.
Drop shipping works well for many individuals working from home and for small businesses as they can:
- Avoid up front capital investment costs.
- Avoid having to buy stock that they may not be able to sell.
- Avoid the need for storage space.
- Avoid shipping costs and the time costs associated with having to post items.
- Make sure that their customers get products quickly and efficiently.
It is important to make sure that the drop shipping company will give you good terms and that they will deliver quality goods with an appropriate returns/refund policy in place in case of issues. Reputable drop shippers will not charge you a fee to sell products on their behalf but will simply charge you when you sell something or may even invoice you on a monthly basis.