Dropshipping is an e-commerce business model in which a retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. The retailer makes the sale, collects payment from the customer, and then pays the wholesaler or manufacturer for the goods that were shipped.
The process of dropshipping involves three main parties: the manufacturer, the wholesaler, and the retailer.
1. The Manufacturer: creates the product and ships it to the wholesaler.
2. The Wholesaler: obtains the product from the manufacturer and stores it in their warehouse. The wholesaler then sets the price for the product and sells it to the retailer.
3. The Retailer: purchases the product from the wholesaler and lists it on their own website or marketplace. The retailer then sets their own price for the product and handles the customer service, marketing, and other administrative tasks associated with the sale. They also handle the payment processing for the customer.
Once a customer places an order, the retailer submits it to the wholesaler or manufacturer, who then ships the product directly to the customer. The retailer then collects payment for the order from the customer and pays the wholesaler or manufacturer for the goods shipped.