Wholesale drop shippers have existed for years even before the internet opened up to the wide world. Product distribution explains drop shipping so let us check out what exactly product distribution is about. In the olden days drop shipping started out as a simple procedure of getting products to the consumer.
The Ajax Manufacturing company made cleaning supplies as an example and that was all that they did. The individual entrepreneur approached the Ajax Manufacture about getting the cleaning supplies in large quantities with an over all savings. The Manufacturer was happy to accommodate, as they were not in the business of selling.
The distributor then approached several retail outlet stores and offered them Ajax cleaners at a very reasonable price. In turn, the retail outlet could mark up the product and sell it to his consumer. All involved from the Manufacturer to the distributor to the retail outlet made a profit. The consumer found the product they wanted at a price they felt was reasonable.
This simple equation will help explain the above scenario.
1. Ajax Manufacturing sold products to a distributor for $12.00 a case of 12. Cost to make was .50cts per can. (profit $6.00)
2. The distributor sold the case to retail outlets for $24.00 a case. (profit $12.00)
3. The Retail Outlet marked each can out at $$3.50 a can (profit $18.00)
4. At a regular store, the Ajax cleaning products sold out at $4.50 a can so the consumer saved $1.00.
The beauty behind drop shipping is that the distributor places the order to the Manufacturer who in turn drops ships to the Retailer; therefore, the distributor does not have to buy in advance nor keep a lot of stock on hand. The process is so simple that it is hard to loose money on this type of procedure.
The invention of the internet greatly increased the business of drop shipping to a very profitable at home business. The idea of distribution started at the beginning of time with the first cave dweller trading fire for wood. For it is said without wood the fire will not remain and with out fire there is no need for the wood to remain. it takes both in order to keep one warm.
There are two types of retailers the one stocks merchandise for resale and the other stocks no merchandise is a stockless retailer. You as a drop shipper become the stockless retailer. The first type of retailer must have money to stay in business because they need to buy the merchandise, have an adequate storage place, and a retail place for sales.
The second retailer only needs a computer. The drop shipper retailer opens up an Internet Store, with a shopping cart and the ability to accept credit cards. Many good distributors are willing to accept your orders and ship to the designated customer. You are not the drop shipper.
The company who supplies the products to your customer for you is the drop shipper. You become a Stockless Retailer. Today there are many on line Stockless Retailers and drop shippers you must make sure that you are dealing with real people and companies in order to prevent any fraud towards yourself and your clients. Fraud is the biggest problem you face.