Drop shipping 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, another retailer, 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. (1)
Drop Shipping Example – Amazon
Amazon is a hybrid of drop shipping and fulfilling its own product shipments. If you see that an order is coming from a third party supplier and not Amazon.com, then they are utilizing the drop shipping technique. (2)
References
- Drop shipping, https://en.wikipedia.org/wiki/Drop_shipping
- 5 Examples of Companies That Use Drop Shipping, http://www.findexamples.com/five-examples-of-companies-that-use-drop-shipping/
