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Drop Shipping: This article explains the basic information needed to understand what drop shipping is and how it can allow you to have a profitable online storefront.

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What is Drop Shipping?

Drop Shipping is a method of selling products without having to stock any inventory. With this method of sales, you (as a middleman) sell single items and then order the product from the manufacturers or major stock distributors. Then they drop ship the merchandise directly to your customers.

This benefits both you and the manufacturer. The manufacturer gains additional sales which they do not have to advertise. You do not have to spend lots of money for an inventory or the risks involved with having a large stock of items. You also benefit because you do not have to pay for storage, insurance, overhead or personnel.

This allows you to concentrate on sales and advertising functions.

How Drop Shipping Works

First you have to find a distributor who is willing to drop ship products that you want to sell. It should be noted that you are not a drop shipper - you are going to become a stockless retailer. After you find a distributor, you establish an account as a retailer for them.

Next, you create an online store which displays the images and descriptions they provide you for the products you want to offer. When a visitor sees a product they want, they purchase the item through your online store and arrange payment through your shopping cart and payment gateway.

You contact the drop shipping supply source by fax or email and place an order for the item(s) providing them with your customer's name and other information.

The drop shipper then uses the information you provided to ship the product to your customer. They package the product with your store's name and address on the package so the customer never knows the difference!

The distributor then charges you a wholesale price plus shipping (which you have already received from your customer).

How You Can Profit From Drop Shipping

There are lots of legitimate drop shipment suppliers that will not require you to have a retail store. They probably will want to know that you are in a business. This may mean that you will need to provide a resale license or a retail sales tax permit.

As with any business, you will need to know the value of the products you intend to sell. Some suppliers will claim to have wholesale pricing, but their actual price will leave you with a very small margin of markup. Some markets are also very competitive, for example computer products and electronics. With careful research you should be able to choose a good distributor and a line of products that will allow your Internet business to maintain a good profit.

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