Drop shipping is a supply chain management system. It is the process of delivery of a product to the customer or the wholesaler by the retailer. Drop shippers are the wholesale suppliers who send the products directly to the customers. Retailers take the order and details of shipment from the customer and transfer it to the wholesaler of goods or the manufacturer. The profit of the retailer lies in the difference between the cost of the wholesale and that of retail.

Some retailers keep samples in their shops. This enables the customer to see and examine the item before buying it. Others offer a website or a catalogue displaying the items. The products may be shipped without the sender's address or it may be shipped with the return address of the retailer so that the source of the wholesaler remains confidential. The wholesaler may include a packing slip with the name, contact details and logo of the retailer. You can get the list of drop shippers from the wholesale directory.

Drop shipping is done when the retailer selling small amount of merchandise gets a large order. The owner of the retail store then makes an arrangement to have the product directly shipped to the customer. A drop shipper's directory contains all the details of the wholesale and drop ship suppliers.

Auctions are also done online. The auctioned item is shipped directly to the person who makes the highest bid. The seller gains from the difference between the wholesale and the bidding amount. The seller can also make a list of the products which he does not have with him presently. However, he needs to follow the policy of the auction site on pre-sale goods.

Private label is a rising trend in the drop shipping business. The drop shippers manufacture a product for the retail seller and drop ship the product.

The two major advantages of drop shipping are that there is no need to buy upfront inventories and the flow of cash remains positive. This is because the buyer pays the retailer who in turn pays the drop shipper. So the amount remains with the retailer for a certain period of time. Drop shipping also has some other advantages. There is no fear of duplication of the product as it is picked, packed and shipped by a single warehouse. Drop shipping decreases the price of shipping which is paid by the customer. Also it reduces total management of inventories.

Like in other businesses there are a few risks in the business of drop shipping too. Back ordering may take place. The retailer may place an order for a certain product which is sold out. This makes the retailer wait for a long period. The retailers should be kept updated about the availability of the product though it is the job of the owner to know of the availability of the item. A wholesale drop ship magazine contains all the details regarding wholesalers, drop shippers and the products. Home-based drop shipping business done on internet may prove to be a scam.