Dropshipping describes a fulfillment method in which an online store doesn’t keep inventory of the products it sells. Instead, when a customer places an order, the retailer buys the item from a third party at wholesale prices. Then, the third party (supplier) ships the product directly to the customer.
Why Dropshipping Has Increased In Popularity
Dropshipping has grown popular with eCommerce businesses because it allows them to sell products without actually holding any inventory. Retailers simply fulfill orders by purchasing inventory from a third party supplier on an as-needed basis. As a result, online retailers can offer a wide selection of products without the overhead costs associated with keeping a lot of products in stock.
Who Pays the Shipping Cost?
The RETAILER must first cover the shipping cost. However, the customer is ultimately the one who ends up paying for shipping. Many online retailers simply charge the shipping rate when a customer places an order, but most successful eCommerce businesses use more effective shipping strategies. Such strategies include offering free shipping or charging a simple flat rate on top of their product prices.
It’s crucial for eCommerce businesses to minimize their shipping costs, so a popular choice is to use shipping software to buy discounted shipping labels.