I am often asked, why would a wholesaler drop ship instead of just selling directly to the public. This is an excellent question and understanding the answer is key to understanding the whole drop shipping business.
What do Wholesalers Do?
Wholesalers purchase products from manufacturers with the goal of selling large quantities to retailers. Many wholesalers will only sell items in large quantities – we are talking entire truckloads for some items. These wholesalers prefer to make their money in large lump sums, usually on a few big accounts.
However, this model leaves money on the table. There are many online and small retailers that cannot afford to purchase huge quantities of merchandise in one lump sum. This is where drop shipping comes in. With drop shipping, when a customer makes a purchase from a retailer (either online or in a store), the retailer sends the shipping information on to the wholesaler. The wholesaler then ships the order (which may contain as little as one item) directly to the customer. The wholesaler usually ships with a generic return address and either no insert or the retailers insert. Basically, with drop shipping it looks like the retailer shipped the item.
Why do Wholesalers Drop Ship?
So, why would a wholesaler go to the trouble of drop shipping? Well, some (maybe even most) wholesalers do not drop ship. They are setup to handle large orders and do not want to deal with small one’s. There are, however, many advantages for the wholesaler that decides to drop ship. First, it means increased business. Second, it provides a competitive advantage. Many online retailers prefer drop shipping and will only use wholesalers that provide it.
Why don’t the drop ship wholesalers just market directly to the consumer and keep all the profits for themselves? In theory, there is not reason why a drop shipper can’t do this. However, wholesalers do not really understand the retail market. They do not know how to market directly to consumers and they do not want to handle customer inquiries and support.
If you are looking for a drop ship wholesaler, but cannot find one for the products you want to sell, it is worth approaching a traditional wholesaler about a drop shipping arrangement. You might get lucky and find a wholesaler that was already considering drop shipping or you might be able to strike a mutually beneficial arrangement.
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