How Can Drop Shipping Benefit My Retail Operation?

Drop shipping is an arrangement in which the retailer sells the product, and the wholesaler agrees to ship the product to the customer, complete with the retailer's label on the package. This agreement benefits both parties: The wholesaler gains retail outlets and sales of a product, while the retailer collects a percentage of the sale but doesn't have to worry about shipping or carrying an inventory. Drop shipping is most commonly used by companies such as Amazon.com and Overstock.com because it allows them to build up thriving online businesses that require little or no initial inventory investment.

For more on shipping, be sure to read Shipping as a Profit Center.