Are you looking for a supply chain management technique? To become a successful retailer you should learn about the strategy of not keeping goods in stock rather transfer all of your customer orders and shipment information to either the wholesaler or manufacturer that will send the goods to your customers directly. Keep in mind that in retailing business, you make your profit out of the wholesale and retail product prices’ difference.
So how can you carry out this technique? You can perform drop shipping by having “show only” products displayed in your store. This way, your customers can extensively inspect the items that they would like to purchase. You may also choose to present a website or you can make a catalogue to show your products.
There are some precautionary measures that most retailers do if they drop ship merchandises or products from wholesalers, so their customers will not know where they can get the item in wholesale price. This is made by blind shipping, wherein products are being shipped without return addresses. Another procedure that can be performed is by private label shipping, whereas all merchandises being shipped from the wholesaler contain return addresses directing to the retailer. This process may also include a customized packing slip that indicates the retailer’s company logo, name and contact information.
The drop ship strategy takes place in small businesses when the retailer who usually sells in small quantities to its clients accepts large order for a particular product. Instead of delivering the shipment to the retail store, the retailer arranges the route of the shipment to be sent directly to his customer. This technique is also frequent in industries that market huge items like steel buildings. The retailer will take a deposit from the customer and have the equipments or materials shipped to the building site of the buyer from the supplier’s warehouse or manufacturing facility.
Most internet marketers or sellers in online auction sites drop ship the items they sell, wherein they will list a product as new and have it shipped directly from the wholesaler to the address of the highest bidder. The marketer earns money from the difference between the wholesale price and the winning bid amount, minus any merchant fees from the online auction house. Sellers in this market are allowed to list products that they do not have possession of during the bid, as long as they follow the auction site’s pre-sale items rules and regulations.
Generally, there are two primary benefits of the drop ship marketing scheme. First, there is no immediate inventory to buy any product, which you are not sure if the customers will purchase. Second, there is an affirmative cash flow cycle because you are promptly paid once the purchase is completed. Most of the time, retailers pay the wholesalers using credit cards that’s why there is a specific period of time when retailers already have the money from the customers while the wholesalers are still not paid.
Other advantages of drop shipping that you can benefit from include: reduced total inventory administration and shipping costs since they are being passed to the customers and there will be no incidence of giving out too much effort because there will only be a single warehouse that will pack, pick and ship the items, which lessen the supply chain costs.