Drop shippers, drop shopping and drop shipments have become everyday words in the vocabulary of eCommerce What is a drop shipper really and what do they do?
A drop shipper is a merchant who picks, packs and ships a product on behalf of an ecommerce business (seller).
The drop shipper will receive the order details from the seller and then send the order to the seller’s customer without the seller ever handling the product.
A drop shipment is the actual shipment that is being sent by the drop shipper.
The term drop shipping was first used in the 60’s and 70’s when mail order companies started taking advantage of a more efficient and economic mail and courier system in the USA.
Orders could be faxed through from the mail order company to a merchant or warehouse who owned and managed the products/stock. The merchant would then fulfill the order on behalf of the mail order company.
The merchant becomes the ‘silent partner’ and even though they do most of the work, they are not known to the customer. The purchase agreement is between the seller (mail order company) and the customer.
The term drop ship refers to the fact that the merchant will ‘ship’ and ‘drop’ the parcel with the term drop referring to just leaving the parcel without revealing their identity.
Drop shipping has since evolved dramatically and in 2006, dropshipping from China really took off. This was mostly thanks to more efficient and economic shipping.
Drop shipping from Aliexpress became a massive business opportunity where sellers could source products for pennies and ship them via ePacket (cheap and efficient shipping lane with tracking) to the rest of the world.
Using Shopify along with apps like Oberlo and Aftership, it was possible to run a big drop shipping business as a one-man-band since the technology automated nearly every aspect of the business.
The term drop shipper has become synonymous with sellers who use drop shipping to fulfill orders.
Technically, that is wrong.
If you have a Shopify store that uses drop shipping to fulfill your orders then you are NOT a drop shipper. The drop shipper is your supplier/warehouse/merchant in China who fulfills the order.
Drop Ship Definition:
Drop shipping is a fulfillment method where a retail or eCommerce business will sell products that they do not own and that they do not hold any stock for.
Instead, there is a supply chain management where the retail or eCommerce business will send order details directly to a merchant or warehouse who will then send the order to the customer anonymously.
The retail or eCommerce business (seller) will sell the products at retail prices while only paying the merchant cost price – netting the difference as their profit.
The retail or eCommerce business’ sole focus is on marketing and selling with no overheads for a storefront, purchasing and storing inventory or employing staff for order fulfillment.
The drop ship process is a fulfillment model and not necessarily a business model since the business can switch from drop shipping to any other fulfillment model without changing the business model.
Drop Shipment Definition:
A drop shipment refers to the actual parcel that is being shipped by the drop shipper as part of his responsibility to fulfill the seller’s order(s).
Most drop shipments are being shipped blind. A blind shipment is a parcel that has no return address on the parcel that can be traced back to the merchant who is actually shipping it.
When you are selling drop shipping products from the USA to customers in the USA then it is possible for your merchant to put your address on the parcel and ‘blind ship’ in a way that makes it appear as if you are actually shipping the product.
When drop shipping from China or to most countries internationally, blind shipping is not possible since the parcel needs to show the origin of that parcel on the label.
How Dropshipping Works Step by Step?
The concept of drop shipping is not all that complicated once you’ve done it but for many newbies it can be very confusing.
When you start using Shopify and connect the apps needed it can get tricky if you’ve never done it before. Thankfully, it has become easier and easier with apps like Oberlo making is dead simple.
Here is a detailed breakdown of how dropshipping works step by step
Step 1: Seller finds a drop shipper (merchant, supplier, warehouse or fulfilment house).
Step 2: Seller sets up an online store with Shopify or Woocommerce
Step 3: Seller lists products from the drop shipper in their own online store (without buying any stock upfront).
Step 4: Seller connects his store (and products) to the drop shipper
Step 5: Seller focuses on branding and marketing
Step 6: Seller makes a sale at retail price
Step 7: Customer completes the order on the seller’s store
Step 8: Seller’s store automatically sends order details to the drop shipper
Step 9: Seller pays the drop shipper for COG at cost price
Step 10: Drop shipper picks, packs and ships the order to the seller’s customer
Step 11: Drop shipper sends the tracking details to the seller
Step 12: Seller’s store automatically sends the tracking details to the customer via email
Step 13: Customer can check and track their parcel
Step 14: Parcel gets delivered with NO reference to the drop shipper
Step 15: Seller’s store automatically marks the order as complete
What Is A Drop Shipper – Conclusion
Selling products on your Shopify store from China does not make you a drop shipper. The common reference however is that this is what a drop shipper is but technically it is wrong.
A drop shipper is the party that actually ships the parcel. This can be a supplier, merchant or fulfillment house. If you drop ship from Aliexpress then your drop shipper will be the Aliexpress seller you are dealing with.
If you use CJ Dropshipping, Eprolo or Udroppy then they are your drop shippers. They are dedicated fulfilment houses and even though they are based in China, they offer you a lot more in terms of service.
Drop shipping is not a new invention and has been around since the 1960’s with mail order companies. Drop shipping allowed mail order companies to have really diverse catalogs without having to invest in vast amounts of stock.
They could simply ‘farm out’ the fulfillment of the orders in their catalog. This allowed them to focus on marketing and sales instead of the tedious tasks of fulfilling diverse mail orders.
With the explosion of eCommerce, the drop shipping model became hugely popular in 1996 with Aliexpress and cheap shipping and cheap products from China.
The vast majority of drop shippers for eCommerce is based in China.
China is still responsible for a large percentage of manufacture of commercial products and shipping directly from China to consumers in the USA, Europe and the rest of the world is still the most lucrative.
With retail businesses going out of business and eCommerce booming, drop shipping is not only here to stay, it is here to grow.