Want to learn more about drop shipping? In this three part video series, Lou Kaszubski walks you through drop shipping, its benefits, convenience and practicality as well as reasons as to why it makes for a good business model in global trade.
What Is Drop Shipping?
Drop shipping is a supply chain technique in which the seller has no inventory. Orders are fulfilled directly from a third party such as a:
- Manufacturer
- Wholesaler or
- Warehouse
Due to the increase in offshore manufacturing and advancements in Third-Party Logistics (3PL), you are no longer limited to the company down the street. Global trade is now accessible to everyone.
Benefits Of Drop Shipping
Having no physical inventory means:
- Lower overhead
- You do not have to handle the goods
- You do not have to manage a warehouse
- And most importantly, you do not have open a retail location
You simply buy and sell the goods.
Why Is Drop Shipping A Good Business Model?
Drop shipping allows you to:
- Maximize your economies of scale
- Consolidate orders thereby avoiding minimum order amounts
- Avoid excess inventory when trends or market tastes change
- Add new products quickly and efficiently without substantial investment
- Create a positive cash flow, for example, you take an order from a client, collect the funds up front and then pay the supplier via credit terms or a credit card.
- Benefit from better shipping rates combined with lower damage as the goods are handled less
Convenience And Practicality Of Drop Shipping
- You hold no inventory so you do not have to package and ship the goods
- You do not have to worry about the export regulations of the country you are purchasing from
- You can sell all over the world and offer a wide variety of products
What Are You Responsible For?
In our next blog post we will take a look at 'International Commercial Terms', commonly referred to as Incoterms®. International Commercial Terms govern the rules of commerce transactions and detail each parties actual responsibilities.
Video | Drop Shipping Part 2 | Using Incoterms To Your Benefit
Video | Drop Shipping Part 3 | Leveraging Free Trade Agreements And Non-Resident Importing
