The eBiz Blog

One way for ecommerce enabled sites to expand their catalog is to sell products made or supplied by a third-party provider who can ship the product directly to the customer.  That practice is known as dropshipping.  The site owner sells the product on their own website at a higher price than what the supplier offers it to the site owner.  When the site owner gets an order for the product they pay the supplier the discounted amount, keep the markup, and relay all the order details to the supplier.  The supplier then fulfills the order and ships it directly to the customer.

This setup has several benefits for the site owner.

1. They are able to offer a wider range or variety of products without having to keep any large inventory of them.
2. The site owner is able to sell the products without having to put out any of their own money upfront. It only costs the site owner after they have already received an order from a customer for the product.
3. The site owner does not have to get involved in the shipping of the product.

Just like anything else in life though, there are some potential negatives to dropshipping.

1. Some dropshippers make it difficult or costly to the site owner to have any products returned. Ask about return policies and/or any restocking fees. Also check to see if the customer can send the product directly back to the dropshipper or if it has to be sent back by the site owner.
2. Choose a dropshipper who can provide real time inventory numbers for their products. The whole point in using a dropshipper is so the site owner doesn't have to stock any product. If the dropshipper doesn't keep the product in stock then you want to know about it before a customer places an order, not after.
3. Don't use any dropshipper who doesn't include a flat rate for shipping in the wholesale price to the site owner. You need to know what the base shipping will always be and don't need any surprises. A plus is if they offer upgraded shipping options such as next day air or 3 day select so that you can offer those options in turn to the customer.

Only do business with a reliable dropshipper.  Ask for references and check them out.  If there's any problem with your customer getting their order then you want the dropshipper to be easy to work with to get the problem resolved.