Drop shipping is a fairly simple business plan that manages the supply chain without requiring retailers to purchase products up front before they sell them to customers. Practically anyone with an interest can open an ecommerce storefront on the Web and begin selling products that are then shipped directly from the manufacturer to the customer through the mail. Many business people have chosen the e bay storefront to start their business with this simple process because it requires a low cost entry point for buying and selling online.
The way drop shipping works is simple. Retailers find a product that they believe will be attractive to customers from a company that is willing to drop ship. Then they use their ecommerce storefront to list that product. The e bay storefront is probably the most popular choice, but there are some other options that people may consider. At this point, the retailer is charge of the promotion of that product and they collect the payment for it, but they are never actually in possession of the item. When someone orders it, the manufacturer sends it directly to them.
Drop shipping has many benefits, but the most important is probably the fact that entrepreneurial retailers never have to stock the inventory themselves. The retailers who operate an ecommerce storefront don't have a huge capitol investment requirement when they start their business because they don't have to purchase the products up front. Once the e bay storefront is up and running, the retailer simply lists the item that the supplier is willing to drop ship and then they collect the payment.
Another benefit of drop shipping is the positive cash flow cycle – retailers receive the money before paying the supplier for the product, so there is always money to cover any fees. As long as an online retailer chooses a good product and works with a good manufacturer, there is nothing to lose.