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p shipping differs from traditional wholesale trading in that it is a form of ‘just in time’ shipping. Basically, drop shipping means that the online seller will order the product from the wholesaler as and when customer orders are received. The seller simply receives the order and passes on delivery information to the wholesaler for delivery. The customer pays the seller, the seller pays the wholesaler and the seller earns the profit from the difference between the sale price and the cost price. So,[link widoczny dla zalogowanych], the product does not pass through the hands of the seller at any time, and goes directly from the wholesaler to the customer in the drop shipping model.
The traditional wholesale trading method implies that the seller orders a stock of the product from the wholesaler and maintains this stock to service customer demand. The physical possession of the product is the differentiating element. This clearly has a cost associated with it. Firstly, there are storage costs,[link widoczny dla zalogowanych], which can be daunting if the product occupies a large amount of space. Secondly, there will be shipping costs from the wholesaler to the seller. Additionally, there is the cost of carrying unsold stock for a long period of time that eats into profits from sold goods.
So suddenly, drop shipping seems like a great idea. But drop shipping has its drawbacks too. In most cases, especially if you are a small business, you will pay the full MSRP, which will squeeze your profit margins. Additionally, you may have little or no information on the status of your order from the wholesaler, affecting customer service levels. Since you are essentially passing on the cost of carrying inventory on to the wholesaler, you will be charged for it. But, on the upside, you will only need to pay when you receive customer orders.
Reliability is an issue when drop shipping