Dropshipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in retail businesses, the majority of retailers make their profit on the difference between the wholesale and retail price but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.
Procedure
Some drop shipping retailers may keep "display items" on display in stores so that customers can inspect an item similar to those that they can purchase. Other retailers may provide only a catalogue or website of their products.
Retailers that drop ship merchandise from wholesalers may take measures to hide this fact to avoid any stigma or to keep the wholesale source from becoming widely known. This can be achieved by "blind shipping" (shipping merchandise without a return address), or "private label shipping" (having merchandise shipped from the wholesaler with a return address customized to the retailer). A customized packing slip may also be included by the wholesaler, indicating the retailer's company name, logo, and/or contact information.
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