What is Drop Shipping?

To understand what Drop Shipping is, you need to first understand all about product distribution.

Businesses have been distributing products for many years, in fact, even since before the first dinosaur hunter traded a fur coat for a stone spear.

And heres how drop shipping works.

Let’s say 123 Reptile Manufacturers makes a product called Mega Snake Oil. We’ll say that Mega Snake Oil has been around for years. It’s a very well known brand name product. It will without a doubt give you the healthiest, warmest snakes on your block, and all herpers (reptile owners) want a few.

123 Reptile Manufacturers makes Mega Snake Oil, but they don’t sell it directly to the public. They’re a manufacturing operation. They’re far too busy making reptile supplies and heating test bunnies to go around building stores all over the place. They need distributors; companies who will take their product and distribute it to the places that will sell it.

For years, 123 Reptile Manufacturers has sold Mega Snake Oil to a company called RTB Distributors. The founder of RTB Distributors knew the 123 Reptile founder herself, back in the old days when she made her Snake Oil by hand, out in the herp shack.

Today, RTB Distributors buys Mega Snake Oil by the truckload. They pay $5.00 a case for it, which is a very good price. It’s such a good price, it has it’s own name: the Manufacturer’s Wholesale Price.

However, RTB Distributors does not sell it to the general public either. They are a distributor. They distribute Mega Snake Oil.

RTB Distributors works with a chain of retail stores called Herps R Us. This place was founded by a retail business visionary who saw the incredible potential of Mega Snake Oil a long time ago. Today there are Herps R Us retail stores on every street corner in every major city in the country. Herps R Us buys truckloads of Mega Snake Oil from RTB Distributors for $10.00 a case.

So, RTB Distributors makes $5.00 on every case of Mega Snake Oil they sell to Herps R Us retail stores. This makes RTB Distributors very happy.

Cases and cases of Mega Snake Oil arrive in the stockrooms of Herps R Us stores everywhere. The Herps R Us employees open those cases, and pull 12 cans of Mega Snake Oil out of each case. With their pricing guns, they stick a price of $4.50 on each and every can.

Herps R Us stores make a total of $44.00 on each case of Mega Snake Oil. (12 cans x 4.50 per can = 54.00, minus the 10.00 they paid for the case = 44.00).

Herps R Us is even happier than RTB Distributors.

However, the happiest people of all are the people who can stroll into Herps R Us and purchase a can of Mega Snake Oil for only $4.50. They think this is a great price, and they’re walking around with the shiniest ankles in town.

Well, that’s it…basic product distribution. The manufacturer sells to the distributor, the distributor sells to the retailer, and the retailer sells to the end user (the customer). The manufacturer, the distributor and the retailer all make money because the customer is willing to spend money for the product.

Drop Shipping has been around for a long time, too. Probably as long as mail order catalogs; maybe longer. If you want to use a buzzword to impress a corporate type, call it “second party addressing”.

Above, we talked about the manufacturer-distributor-retailer relationship. When you use drop shipping to sell products on the Internet, (or anywhere else), YOU become the RETAILER in that relationship.

It should be noted here, if only to keep the Punctuation Police happy, that if you use the method of drop shipping in your business, YOU are not the “drop shipper”. The company(s) who supply the products to your customers for you is the drop shipper. YOU become a “Stockless Retailer”.

Here’s how drop shipping works.

1.) You open an Internet Store, with a shopping cart and the ability to accept credit cards.

2.) You find a distributor who is willing to drop ship the products you want to sell. The best place on the Internet for this is WorldwideBrands. This website, and their Drop Ship Source Directory and Light Bulk Wholesale Directory are recognized as the best sources for legitimate Wholesale Suppliers on the Internet. They are also the only drop ship directory in the world to be certified by eBay, anyone else claiming so is a fraud.

3.) You establish an account as a retailer with the Wholesale Supplier you choose.

4.) You receive images and descriptions of the products you want to sell from the Wholesale Supplier and post them on your Internet Store.

5.) A customer surfs into your Internet Store, and falls in love with a product that you have priced at, say, $80. They purchase the item with their credit card. Your Store charges their credit card $80 plus your shipping fee.

6.) You turn around and email the order to your Wholesale Supplier, along with the customer’s name and address.

7.) The Wholesale Supplier sends the product directly to your customer, with YOUR Store’s name on the package.

8.) The Wholesale Supplier charges you the wholesale price of, say, $45.00, plus shipping.

9.) Your customer gets a cool product from your store shipped to their door, and they tell all their friends about you, and you make even more money.

There you have it. You just made a $35.00 profit on one item. You didn’t have to buy a whole bunch of the product and keep it in your warehouse, hoping you would sell it. You didn’t have to pay to have it shipped to you, and then pay to ship it to your customer. All you did was send an email to your Wholesale Supplier.

That’s the drop shipping process in a nutshell!