Imagine a world where an individual, without much money, could sell products to customers located anywhere across the globe, without having to deal with any of the logistical hassles involved in actually dealing with physical products.

This hypothetical individual could, for instance, receive full retail price payment for a product from a customer, purchase the product at a wholesale discount, and then have the wholesaler ship the product to the customer--and even attach a label making it seem that the product came from the individual.

This hypothetical individual could become a very rich individual indeed, without making significant up front investment and while maintaining constantly positive cash flow.

This imagined world, of course, is here and now, and the engine of its existence is called drop shipping. But, as usual, things arent always as easy as they seem.

Knowing the tricks of the trade is essential to drop shipping success.

Fulfillment At Its Finest: How Drop Shipping Works

The key concept of drop shipping is that the retailer does not keep any inventory on hand, but rather partners with a wholesaler that does have inventory on hand. This arrangement drastically decreases the investment necessary to sell physical goods.

The retailer, often located online or offering a catalogue, accepts orders directly from customers, and then coordinates with the wholesaler to purchase the product and move it out to the customer.

An excellent fulfillment house is the key to this process. Without a fulfillment center that can be trusted, the retailer can be left fielding angry phone calls and e-mails from dissatisfied customers.

When the fulfillment center does to a great job, by contrast, the retailer benefits hugely. Many drop ship specialist fulfillment centers, for example, use the retailers name and address as the return address on the package, making JoesShoePalace.com competitive with Nike, at least in terms of professional appearance.

Whats more, such customization is not difficult or expensive for a top notch fulfillment house. Once a proper automated system is in place, such adjustments are easily made.

The end result is a smoothly running, efficient, relatively inexpensive fulfillment operation for all parties involved.

But Drop Shipping Requires Especially Effective Systems

Anyone who has ever played the game "Telephone" knows that messages become garbled and change as they move from person to person. A similar thing happens when it comes to drop shipping fulfillment operations.

When everything is happening at once, things can get confusing for everyone. Luckily, there are software systems that can help retailers avoid common problems related to drop shipping. These common issues include:

• Credit card fraud cases
• Damaged goods
• Returns

Modern fulfillment houses heavily on software, but especially in the case of drop shipping. A busy fulfillment center does not have time to call a small retailer over and over again.

Order status, for example, must be immediately available and accessible, 24 hours a day, 365 days per year. Transparency is a must.

Fulfillment centers that have mastered the use of software are by far the best candidates for retailers seeking to take advantage of the ease and affordability of drop shipping.

Source

Order Storm (PDF)