Drop shipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details either to the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. As in retail businesses, the majority of retailers make their profit on the difference between the wholesale and retail price, but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.
Starting a full-fledged online retail store can be a daunting task involving investment in inventory, warehouse and logistics to procure and deliver products. How about an online business where all that you need to do is to collect payments? Sounds good isn’t? Thanks to the drop-ship business model, it is a possibility. Online businesses are flourishing in India. While existing e-commerce players are scaling up operations by adding products and services, new portals are successfully claiming a pie of the billion Indian e-commerce market. The market still has the capacity to absorb many more players.”The number of Internet users in India crossed 100 million last year and it is still growing by leaps and bounds. Currently, e-commerce penetration is very low in India if we compare it with that of the rest of the world. This is an advantage for e-commerce as it allows the players to explore untapped Indian markets and get absorbed. In this growing market, a lot of manufacturers are willing to drop-ship, or send products directly to an end-consumer on receiving an order from a retailer (seller).As a seller, you identify and contact suppliers or manufacturers for products you want to sell. After finding a suitable supplier who drop-ships, the products are listed for sale on your site,
The retailer does not require to stock products as orders are shipped to the end-buyer directly by the supplier, who gets paid by the retailer. Some drop-shipping companies even dispatch products with the branding of the seller. You can find them on business-to-business portals such as Alibaba.com and IndiaMART.com.
As you are free to fix resale prices for the products, the margin between the prices offered by the supplier and the retail price will be your profit. Of course, there will be some costs in managing the retail business. So the profitability in this business depends on your ability to find reliable suppliers offering sufficiently low prices.”Though drop-shipping is not a new concept in India, it is still gaining momentum and penetrating deeper into markets. It is popular with larger e-retailers who want to minimize investments in stocking up inventories. Apart from bigger players, several niche e-retailers are also using this model extensively,”
A drop-ship based business also offers greater flexibility and allows the seller to test new markets without having to worry about unsold inventories. This should help identify niche products.
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