The concept of drop shipping though nothing new in the commercial world plays a key role in modern e-commerce. From fancy gift items to hardware drop shipping solutions virtually cover a wide range of goods retailing. To explain more commercial terms, drop shipping is a – “supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.”

Pros

Like other business techniques drop shipping has its own good and bad sides. The major benefits of drop shipping are -

First, you don’t have to indulge in inventory management as you do the job of a retailer. The job of manufacturing and inventory management and shipping are done by another company. Your job is to sell the product on their behalf and get paid by the customer. Then you pay your drop shipper a certain percentage of the price paid by the customer.

Secondly, packing of goods and shipping are done from one warehouse reducing the cost and effort of shipping whereas shipping charges can explicitly be passed on to the customers.

Cons

On the flip side, if the wholesaler does not update its retailer about insufficient stock of products it can reflect badly on the retailer. There remains possibility of back ordering and delayed shipment.

Despite the risks involved in this business drop shipping proved beneficial for small scale enterprises opening up a new horizon for online business and marketing world.

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