Make drop shipping the best distribution scheme for your business

Online businesses can utilize drop shipping for their businesses. Drop shipping is a distribution technique wherein the retailer does not keep any inventory and forwards all orders to the wholesaler. The wholesaler will then deliver the merchandise to the end-user. This technique is good for lowering overhead costs and distribution expense.

This method is also sometimes referred to as "blind shipping" because retailers hide the identity of the wholesalers to protect their reputation and interests. Sometimes, wholesalers will ship the merchandise with a return address customized to the retailer and this is called "private label shipping".

Retailers, especially those that run small operations from their homes can benefit greatly from drop shipping. They no longer need to invest in stocks or worry about the storage of the merchandise. What you can do is set-up an online store where you can publish an online catalog that clients can view. You can earn good profits from drop shipping because your mark-up from the wholesale cost becomes your profit and your operational expense is also effectively lowered. The wholesalers will charge you for the drop shipment services but at least that's one less thing to worry about.

Aside from the profit, drop shipping is a good way to avoid over-inventory or stocking up on items that may not be bought. Your capital also won't get tied down to your merchandise. Your online catalog will be the only thing you will have to focus on.

Just make sure that the wholesaler has an efficient distribution system so that you don't end up being blamed by the client for the wholesaler's inefficiencies. Remember that the clients think you are shipping the items yourself. If the items don't get delivered on-time, then the customers will blame you and not the wholesaler. It would also be wise to evaluate if the suppliers are real wholesalers and not just middlemen, this way you can earn more profits. Wholesale prices are much lower than middlemen prices, giving you bigger margins.

Of course, although drop shipping provides numerous benefits for the entrepreneur, it also has risks. One of the common problems with drop shipping is back ordering. Sometimes, a wholesaler may run out of inventory for the particular product you are ordering and you will end up having to wait for new merchandise to be delivered to them by the manufacturers. The long wait will reflect poorly on the retailer. As the retailer it is your responsibility to make sure that the wholesaler has ample stocks of the products you are selling online. To avoid getting too many back-orders, try to update your online inventory in real time.