Dropshipping Explained

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What is Dropshipping?

Dropshipping is the process by which a supplier sends products directly to the end purchaser or consumer, on behalf of a retailer.  The retailer organises the sale, does the marketing, collects the payment and takes responsibility for customer service.  The supplier ships the products to their final destination.

In the dropshipping model, retailers don’t have to buy stock up front, or hold any physical inventory on site.  Wholesalers don’t have to offer extended payment terms or extensive credit to retailers and can get their brands into more sales channels.

On the downside, retailers can’t easily check the quality of goods prior to shipping, and need to use suppliers who provide good quality products and reliable shipping services.

Is a dropshipper a manufacturer, or brand-owner or seller?

Dropshippers can be manufacturers, brand-owners, importers, retailers and online sellers.  Confusing!  In a dropshipping model, there is a supplier who controls the physical products and a retailer who sells products without physically handling them. Both the supplier and the retailer are called “dropshipper”.

The word dropshipping is used interchangeably to describe the activities of both the supplier and the retailer.

On the supply side, the dropshipper is the brand owner and the manufacturer or importer of the products.  They are responsible for the design, quality and logistics for the product.  They hold physical stock of the product.  They ship the product to the end user or consumer.

On the retailing side, a dropshipper is a person or business that sells the products to end users and consumers.  The dropshipper has an online store or other online sales channel.  With their online store or channel, they collect payments and shipping information from their customers.  They manage customer service, field enquiries and handle returns, complaints and refund processes. They pass orders and shipping information to their suppliers who ship product to their customers for them.

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