Identifying the pros and cons of drop-shipping – what is it and is it the right business model for you?

An article by Mindy Emsley, Founder and Managing Director of www.merababy.co.uk

According to Wikipedia “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. As in all retail businesses, the retailers make their profit on the difference between the wholesale and retail price”.

Put simply, it means you advertise and sell Product X on your site for a retail price of Y££. When the customer buys Product X, they pay you the Y££ advertised. You then place an identical order with the supplier of Product X, who charges you a Wholesale (drop-ship) price of Z££. You give the supplier the customer’s details and the supplier packs and ships Product X directly to your customer.   The customer receives their goods, the supplier receives the wholesale (drop-ship) price for their product and as with all retail, you have made your profit on the difference between the price you paid the supplier and the price the customer paid you.