What Is Dropshipping?

Dropshipping is a selling technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in all retail businesses, the retailers make their profit on the difference between the wholesale and retail price.

Dropshipping with Online Auctions

Many sellers on online auction sites, such as eBay, also drop ship. Often, a seller will list an item as new and ship the item directly from the wholesaler to the highest bidder. The seller profits from the difference between the winning bid and the wholesale price, minus any selling and merchant fees from the auction site.

Dropshipping in Business

Drop shipping can occur when a small retailer who typically sells in small quantities to the general public receives a single large order for a product. Rather than route the shipment through the retail store, the retailer may arrange for the goods to be shipped directly to the customer. Drop shipping is also very common with big ticket items like steel buildings where the retailer will take a deposit and have the building shipped direct to the buyer's building site from the supplier's manufacturing facility.