Dropshipping is also known as ‘order fulfillment’. It is not a new business concept and has been used for many centuries and is being used by some of the biggest online operators. Amazon and eBay are just a couple of examples.
Utilising the services of a dropship supplier allows you to offer products to customers without having to purchase goods in advance.
Below we have provided a description of how dropshipping works:
- A reseller (retailer) connects with a wholesale supplier, importer or manufacturer who is willing to deliver orders directly to the resellers’ customers. This supplier is called a Dropshipper or Dropship Supplier.
- The reseller promotes and markets goods or services of that supplier through their own retail outlet. This could be an online eCommerce shop , eBay listing , Amazon or traditional retail outlet (yes, even bricks and mortar businesses use dropshipping).
- The reseller takes an order from their customer with payment in advance and provides a sale receipt to their customer.
- The reseller then forwards order to the dropship supplier with the previously agreed wholesale payment.
- The dropship supplier then delivers the goods directly to the reseller’s customer.
- The dropship supplier provides a sales receipt with the wholesale cost to the reseller.
- The reseller gross profit is the difference between the amount paid to the dropship supplier and the amount they received from their customer. Example: Item purchased by reseller’s customer = $120. Amount paid by reseller to supplier = $80. Profit = $40.00.
Dropshipping can be this simple with a legitimate dropship supplier and has become even easier over the years with some suppliers providing a product datafeed and integration into some eCommerce systems. When choosing a dropship supplier, resellers should gather as much information about the supplier as possible before proceeding to do business. It is also a good idea to test the supplier by placing an order and having it delivered to a friend or relative. This will confirm if the supplier can deliver to your customers.
As a member of Dropship Australia you will have access to suppliers, advice and support with questions.