What Does Drop Shipment Mean?
For businesses that wish to sell a wider array of products but don't have the space to store extra units, drop shipping may be an option. This courtesy service from manufacturers can increase revenue and product offerings if handled properly. If not, drop shipping can become cumbersome and fraught with problems. Here are a few notes about drop shipping.
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Definition
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Drop shipment is the practice of the manufacturer shipping merchandise directly to the customer under the direction of a merchant. In other words, the manufacturer fulfills the order instead of the retailer.
Benefits
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Drop shipping service has several benefits: It allows a business to start selling product with little or no overhead, frees up warehouse space and enables a wider offering of items to customers.
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Drawbacks
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However, drop shipping may also create problems. The merchant is at the mercy of the company shipping the merchandise, which can introduce problems in ship time and quality. There is also the risk of being overcharged by drop ship companies that don't offer true wholesale pricing.
Geography
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This is a practice that takes place internationally. Items come from China, Korea, India, Canada and all over the United States, though manufacturers sometimes restrict the countries they'll ship to.
Misconceptions
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Some aspiring business owners seek to create their own business from drop shippers, thinking that it's an easy way to avoid stocking items. This is only true if the suppliers are legitimate and reliable--difficulties arise in popular categories like electronics. Drop shipping is effective if you use companies that have a proven track record and references.
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Resources
- Photo Credit 2006 deltaMike / Creative Commons
