Understanding Drop Shipping
Imagine, for a moment, that there’s a cobbler named Bob. Bob has a bunch of shoes that he wants to sell as a byproduct of his shoe repair business. If you wanted to act as a middleman between Bob and his internet customers, how would you do so?
The traditional warehouse method would involve you purchasing shoes from Bob, holding them as inventory, and then shipping them out to customers yourself. This requires a lot of capital from you, however, and you can wind up with a bunch of shoes that nobody wants to buy.
Under the drop shipping model, you don’t buy shoes from Bob until customers buy them from you. When they do, you have Bob ship them directly to the customer.
Your margins are a bit lower, but you don’t have to worry about inventory, finding and packaging orders, or renting a warehouse. This means you can start a drop shipping business from your home with a relatively small amount of money.