August 8, 2014
Simply put, drop shipping is part of the supply chain whereby a distributor facilitates the receipt of goods from a vendor to a buyer. Refer to the infographic below (noting “us” theoretically is Sourcing Handmade). Through “drop shipping,” the buyer orders goods indirectly from the vendor (via the distributor), who “drop ships” directly to the buyer. The distributor handles the sales orders, purchase orders, and invoices. Advantages of this are numerous:
- The distributor does not (necessarily) carry any inventory. If not, s/he does not incur the costs associated with the overhead involved in carrying stock.
- The vendor does not have to seek out buyers (the distributor helps do this).
- The buyer does not have to seek out individual vendors (s/he can find several vendors through one distributor).
- The economies of scale involved when parties come together, a one-stop-shop (the drop-shipping distributor) who mediates the sale from vendor to buyer.
For those familiar with us (Sourcing Handmade), it is akin to us taking wholesale orders on our site, where we are already introducing handmade artisans and wholesale buyers. Did you check out that infographic yet?