The Simple Process of Drop Shipping
by Carrie Hinkel on March 12th, 2008
With thousands and thousands of online retailers, drop shipping has become one of the most popular ways of running a website behind the scenes. Basically, drop shipping allows a retailer to sell products without storing inventory, as their wholesaler or distributor stores and ships products to customers for a small fee.
Lots of small online businesses are enjoying the convenience and reduced costs of having someone else handle the inventory. And, because of the popularity of drop shipping among retailers, more manufacturers, wholesalers and distributors are offering the service in order expand the number or retailers selling their products.
How drop shipping works
1. Find a drop shipper and set up terms - Luckily, there are plenty of companies that offer drop shipping services. Even some manufacturers are offering the service, though it’s mainly for expensive or over-sized items. You can search for drop shippers on Google or goWholesale, in trade directories or at wholesale trade shows . You will find that you have plenty of companies and products to choose from. Once you have selected your drop shipper, it’s time to iron out the terms: shipping prices, drop ship fees, payment terms, shipment turn-around time, shipping methods, etc. Once you have an established account with a drop shipper, most will allow you to pay once every two weeks or once a month.
2. Take orders/sell the products - Now that you have your drop shipper figured out, it’s time to sell their products on your website. You will be legally required to collect sales tax when a ship to address is in the same state as your company’s physical address. If your website is run out of your house, then that will be the state you live in.
3. Give your drop shipper the order - Once you have an order (yeah!), then it’s time to pass it along to your drop shipper. Many drop shippers have an online management system where you can key in orders. Some systems even allow your store’s orders to be automatically synched with the drop shipper’s order system, depending on the system you use.
4. Pay drop shipper - Most drop shippers will either automatically charge your credit card every payment period or send you an invoice. You can work out the terms when you sign up with a drop shipper. Take into consideration that an automatic credit card payment may be more convenient and help you earn rewards points quicker!
There are several reasons why so many e-tail businesses are using drop shippers to handle their inventory - they don’t have to stock products, pay warehouse fees or deal with the hassles of shipments. For many small business owners, it’s worth the drop ship fee to make day-to-day operations simpler. Perhaps all that extra time can be devoted to opening up another online store!