Drop shipping is a method of shipping goods directly from the manufacturer to the customer, bypassing the need for a retail outlet. It offers faster delivery and reduced costs, but finding legitimate drop shipping companies can be difficult. Regional producer organizations can help, and sellers may need a tax identification number.
Drop shipping, also known as drop shipping, is a method of bypassing the movement of goods from a wholesale or manufacturing location to a retail outlet. Instead, purchased items are shipped directly from the manufacturer to the customer after being ordered, even if the order is still placed through a standard retail or online outlet. Occasionally, direct shipping completely ignores the concept of a retail establishment when a small business is both the manufacturer and seller of goods. Regardless, the main benefit for consumers is that their order arrives sooner and often at a slightly reduced cost due to lower costs of shipping and overall inventory management.
Variations on direct shipping have been around in countries like the US for decades, but are just starting to emerge as part of supply chain management in nations like China. Where retailers are still involved in the direct shipping process, the biggest benefit it offers is that there is no need to hold inventory in large quantities and often only samples are put on display. This allows for more efficient use of store space and reduces liability insurance costs.
The advent of online sales has also made direct shipping a common feature of many auction sites. Different categories of successful home sellers use such sites to resell used or new products, including popular products such as books and consumer electronics. The point of sale is effectively the company’s online profile and, when a product is ordered, it is shipped directly from the seller to the buyer.
The convenience of drop shipping attracts many aspiring entrepreneurs interested in setting up a small business with minimal effort. It also leads to many fraudulent practices where online businesses impersonate themselves as direct ship manufacturers when, in reality, they are resellers trying to sell their products to other resellers. Drop shipping experts warn that finding legitimate drop shipping companies isn’t easy, and that standard Internet searches using terms like wholesaler and shipper will pull up mostly fraudulent offers.
The best approach to finding companies that will ship direct is to contact regional producer organizations that specialize in the product sector of interest. Companies that offer real opportunities often require the seller to sign an Authorized Dealer Agreement (ADA), which is a legal document between the manufacturer and the seller that governs product availability, pricing, and more. Sellers in the US will generally be required to have a tax identification number even before a drop shipping company does business with them.
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