What is Dropshipping?
By Chris Malta, WorldWide Brands
Understanding Product Distribution: People
have been distributing products since before the first
mastodon skinner traded a fur coat for a flint axe.
Here’s how it works:
Let’s say ABC Manufacturers makes a product
called Mom’s Ankle Wax. We’ll say that Mom’s Ankle Wax has
been around for years. It’s a very well known brand name
product. It will without a doubt give you the shiniest
ankles on your block, and everybody wants some.
 ABC Manufacturers makes Mom’s Ankle Wax, but
they don’t sell it directly to the public. They’re a
manufacturing operation. They’re far too busy melting
paraffin and waxing test ankles 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, ABC Manufacturers has sold Mom’s
Ankle Wax to a company called DEF Distributors. The founder
of DEF Distributors knew Mom herself, back in the old days
when she made her Ankle Wax by hand, out in the turkey barn.
Today, DEF Distributors buys Mom’s Ankle Wax
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, DEF Distributors does not sell it
to the general public either. They are a distributor. They
distribute Mom’s Ankle Wax.
DEF Distributors works with a chain of
retail stores called Wax R Us. This place was founded by a
retail business visionary who saw the incredible potential
of Mom’s Ankle Wax a long time ago. Today there are Wax R Us
retail stores on every street corner in every major city in
the country. Wax R Us buys truckloads of Mom’s Ankle Wax
from DEF Distributors for $10.00 a case.
So, DEF Distributors makes $5.00 on every
case of Mom’s Ankle Wax they sell to Wax R Us retail stores.
This makes DEF Distributors very happy.
Cases and cases of Mom’s Ankle Wax arrive in
the stockrooms of Wax R Us stores everywhere. The Wax R Us
employees open those cases, and pull 12 cans of Mom’s Ankle
Wax out of each case. With their pricing guns, they stick a
price of $4.50 on each and every can.
Wax R Us stores make a total of $44.00 on
each case of Mom’s Ankle Wax. (12 cans x 4.50 per can =
54.00, minus the 10.00 they paid for the case = 44.00).
Wax R Us is even happier than DEF
Distributors.
However, the happiest people of all are the
people who can stroll into Wax R Us and purchase a can of
Mom’s Ankle Wax 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”.
How Drop Shipping Works:
-
You open an Internet Store, with a
shopping cart and the ability to accept credit cards.
-
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
www.WorldwideBrands.com. This is our website,
the home of OneSource, recognized as the best source for
legitimate Wholesale Suppliers on the Internet.
-
You establish an account as a
retailer with the Drop Ship Wholesale Supplier.
-
You receive images and descriptions
of the products you want to sell from the Drop Shipper
and post them on your Internet Store.
-
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.
-
You turn around and email the order
to your Drop Shipper, along with the customer’s name and
address.
-
The Drop Shipper sends the product
directly to your customer, with YOUR Store’s name on the
package.
-
The Drop Shipper charges you the
wholesale price of, say, $45.00, plus shipping.
-
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 Drop Ship Wholesale Supplier.
That’s the drop shipping process in
a nutshell!
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