Drop shipping is a common type of business model where retailers — retailers, both physical (brick-and-mortar) and online — don’t actually have to carry inventory or keep stock. Instead, orders are made and fulfilled by the manufacturer, who then sends them directly to the customer.
The way drop shipping works is this: When a customer orders an item from a store that uses drop shipping, the retailer takes the order details and forwards them on to their supplier or third party logistics provider (3PL).
The supplier or 3PL then fulfills the order directly from their warehouse and ships it off directly to the customer’s doorsteps.
The retailer never has to touch any of the products it sells; in fact, they don’t even have access to any inventory because they aren’t carrying any in house.
This is beneficial for both retailers as well as customers because not only does it reduce costs such as warehousing fees that would normally be charged and can also reduce turnaround times.
It also helps shop owners save money on staffing cost associated with managing inventory if they do not want those overhead costs associated with running retail operations themselves.
Customers get great value too since prices will often be kept lower than if purchased directly from manufacturers who typically increase prices once items leave their own warehouses due increased shipment charges and taxes.