Ecommerce has become a booming business as more and more people realize the ease with which shopping can be done on the internet. Most of the ecommerce websites on the internet are promoters and not producers. They promote a product but not necessarily produce it. Take for example an online store for mobile phones. It contains almost all the available mobile phones of different brands that one can get in the market. So it's certainly not a producer of these goods as it can not possibly produce products of all brands. It could be a wholesaler but that could end up being very costy if storing and maintenance charges are taken into consideration. So what most of the companies do is take orders from their online customers, Ship these orders to the manufacturers or wholesalers of that product and let the manufacturers or wholesalers do the shipping of the product to the customer. The website gains a commission on the sale made and then acts as a promoter of the product. Even wholesalers if out of stock can do the same thing. They can directly place the order of the customer with the manufacturer of that product and ask for direct delivery to the customer. This is known as drop shipping.
Drop shipping is much more convenient as no storage cost is incurred and if some product does not sell then there is no loss to website as it does not store products but only acts as a promoter. So this Promotes a positive cash flow where a site gets paid when product is sold. As the company itself directly takes the shipping orders and ships the product this consider reduces the chances of duplication or fake products being delivered. There is reduction in the cost of shipping if drop shipping is used and this subsequently reduces the product price so making it available at cheaper rates to the customers. As any other business drop shipping has its pros and cons. One of the cons being the late arrival or long wait for delivery by the customer. A site may not update its inventory list regularly and this can lead to a problem. When a customer buys a product from an ecommerce site the request is sent to wholesaler or manufacturer for drop shipping. But if they are out of stock it could take a long time before the product actually gets shipped and is delivered to the customer. This could bring the sites reliability into question and in turn might end up losing its customers. Here there should be regular updates of the inventory list. These updates must be provided by the wholesalers on a regular basis based on the availability of products in stock.
Drop shipping acts as an intermediate platform between wholesalers, manufacturers and retailers. It is more reliable and very low investment is required. Even if you do not sell anything you do not lose anything. Only care required is to ensure that all legal documents between wholesaler and retailer are in order to avoid conflicts at any later stage. Once you have all the legalities covered drop shipping is the best way to deliver a product at low delivery cost.