There are many advantages to dropshipping today, which is a type of retailing where the company selling the products (either online, through a catalogue or from a display store) does not keep any of the products in stock. When companies dropship products, there is no upfront inventory to purchase and yet there is a very positive cash flow cycle. The dropship suppliers are paid by the sellers, who received the payment at the point of sale, usually by a credit card. Everyone can see their profits immediately and the cost to the customer is often lower as well.
Dropshipping can be a very successful venture for a number of different types of businesses, such as small businesses that are just building a customer base, retailers that deal in online auction sites, and companies that sell custom products. When they simply have the wholesaler dropship products to the customers immediately following the sale, they don't have to pay for the cost of storing or displaying products. Dropship suppliers that sell very specialized products can also see the benefits of having someone else do the selling while they make the products on an order-by-order basis.
Like any type of retail business, dropshipping does come with certain risks that people should be aware of before getting involved, so they know what to avoid. Sometimes the dropship suppliers are out of stock, for example, in which case back ordering may occur, accompanied by a long wait for a shipment while the wholesaler waits for new products. Good dropship suppliers will keep retailers updated, but it is the retail business owner's job to be aware of the quantities that the wholesaler has available.
Having the ability to dropship products has proven to be advantageous for many businesses; in fact, it is the entire basis of retail sales for a good number of companies in this day and age.