Dropshipping Explained

Ever wondered why there are so many online retailers selling the same merchandise at the same prices?  Maybe you will even have spotted some similarity between the websites they use as a platform through which to advertise their wares?   Chances are the website you are looking at is being operated not by the retailer or the manufacturer, but by a dropshipper.

A dropshipper is a person who sells other people’s goods without themselves taking ownership or custody of them.  When a buyer orders from a dropshipper the goods are supplied by the owner or manufacturer, and the person in the middle simply takes a cut of the transaction.  Everybody benefits, because the customer may not have happened across the original supplier had the dropshipper not been displaying the goods.

An Agent Between the Manufacturer and the Consumer

Although the term generally applies to any agent who gets between manufacturer and consumer, it is these days more often than not associated with internet-based trading.  The dropshipper many have an affiliate account with the producer of the goods and will in such an instance take a simple percentage from the order before the originator of the goods ships them directly to the purchaser.

Many auction sites either permit or turn a blind eye to dropship selling, and in spite of it being technically against the rules even eBay does not generally seem to have an issue with it provided the seller can guarantee good service, which is at the heart of eBay’s business model.

Advantages of Dropship Selling

Somebody involved in this mode of trading would be considered a middle-man as opposed to a supplier of hard goods.  Therefore the benefits of operating in such a way are obvious in that there is no requirement for goods to be held or stored.  There is no need for a premises from which to operate, no supply and demand issues or problems associated with stock control.  Significantly, there is also little or no investment involved.  Where an affiliate arrangement exists in preference to any kind of “buy in” the dropshipper may not need to enter into any kind of financial commitment at all, operating instead as a simple go-between facing the customer and the supplier.

Dropshippers Can Operate from Anywhere

Because of this a dropship trader can operate from absolutely any location.  Not only this, but a vast range of goods can be offered, even by somebody operating behind a laptop or a smartphone in the front room of their council flat.  The supplier takes care of the store space, the dropshipper just takes a small cut for making the introduction.

Unsurprisingly then this mode of dealing has proved popular with sole traders, partnerships and small cottage industries.  Sometimes a website will even be provided by the manufacturer or retailer which requires only that it is customised to reflect the corporate image of the trader.  The site will be advertised and promoted through that trader’s contacts, opening up new sales channels for the much larger business at the selling end.