What is Dropshipping?
Dropshipping is a delivery method that can be used in online retail, for example. In this model, the online retailer has the ordered items shipped directly from the wholesaler to the respective customer. The process consists of the following three stages: First, the customer orders goods in an online shop. Then, the online shop operator forwards the order to the wholesaler. Finally, the wholesaler picks, packs, and ships the goods to the customer in neutral packaging.
This way, the online retailer saves capital, storage, and handling costs – an important link in the supply chain is skipped. This type of commerce has been known for a long time under a different name: Another term for dropshipping is ‘direct shipping’.
From the customer’s perspective, nothing changes, as the wholesaler – the so-called dropshipper – does not appear by name. Packaging, delivery note, and invoice only display the online retailer’s name, giving the impression that all services were provided ‘from one source’.
Dropshipping works not only for physical products but also for digital products, such as mobile services or storage space.
Two different types of dropshipping are generally distinguished:
➔ Dropshipping via wholesale warehouse
In direct shipping via a wholesale warehouse, the online retailer can access all items of the wholesaler. However, individual items may no longer be in stock because they have already been purchased by other online retailers’ customers.
➔ Dropshipping via consignment warehouse
In a consignment warehouse on the premises of the wholesaler, the online retailer has exclusive access to this storage area, ensuring delivery capability. The online retailer usually has to guarantee specific purchase quantities for this.
