People have been distributing products since before the first
mastodon skinner traded a fur coat for a flint axe.
Hereís how it works.
Letís say ABC Manufacturers makes a product called Momís
Ankle Wax. We'll say that Momís Ankle Wax has been around for
years. Itís a very well known brand name product. It will without a
doubt give you the shiniest ankles on your block, and everybody
ABC Manufacturers makes Momís Ankle Wax, but they don't
sell it directly to the public. They're a manufacturing operation.
They're far too busy melting paraffin and waxing test ankles to go
around building stores all over the place. They need distributors;
companies who will take their product and distribute it to the
places that will sell it.
For years, ABC Manufacturers has sold Momís Ankle Wax to a
company called DEF Distributors. The founder of DEF
Distributors knew Mom herself, back in the old days when she
made her Ankle Wax by hand, out in the turkey barn.
Today, DEF Distributors buys Momís Ankle Wax by the truckload.
They pay $5.00 a case for it, which is a very good price. Itís such
a good price, it has itís own name: the Manufacturerís Wholesale
However, DEF Distributors does not sell it to the general public
either. They are a distributor. They distribute Momís Ankle Wax.
DEF Distributors works with a chain of retail stores called Wax R
Us. This place was founded by a retail business visionary who
saw the incredible potential of Momís Ankle Wax a long time ago.
Today there are Wax R Us retail stores on every street corner in
every major city in the country. Wax R Us buys truckloads of
Momís Ankle Wax from DEF Distributors for $10.00 a case.
So, DEF Distributors makes $5.00 on every case of Momís Ankle
Wax they sell to Wax R Us retail stores. This makes DEF
Distributors very happy.
Cases and cases of Momís Ankle Wax arrive in the stockrooms
of Wax R Us stores everywhere. The Wax R Us employees open
those cases, and pull 12 cans of Momís Ankle Wax out of each
case. With their pricing guns, they stick a price of $4.50 on each
and every can.
Wax R Us stores make a total of $44.00 on each case of Momís
Ankle Wax. (12 cans x 4.50 per can = 54.00, minus the 10.00
they paid for the case = 44.00).
Wax R Us is even happier than DEF Distributors.
However, the happiest people of all are the people who can stroll
into Wax R Us and purchase a can of Momís Ankle Wax for only
$4.50. They think this is a great price, and they're walking around
with the shiniest ankles in town.
Well, thatís itÖbasic product distribution. The manufacturer sells
to the distributor, the distributor sells to the retailer, and the retailer
sells to the end user (the customer). The manufacturer, the
distributor and the retailer all make money because the customer
is willing to spend money for the product.
Drop Shipping has been around for a long time, too. Probably as
long as mail order catalogs; maybe longer. If you want to use a
buzzword to impress a corporate type, call it ďsecond party
Above, we talked about the manufacturer-distributor-retailer
relationship. When you use drop shipping to sell products on the
Internet, (or anywhere else), YOU become the RETAILER in that
For our purposes, there are two kinds of retailer. There is the
retailer who stocks products, and there is the stockless retailer.
Drop Shipping means that you become a stockless retailer.
Retailers who stock products
Letís imagine that you want to open a retail store on the Internet.
You have to have products to sell, right? Letís also imagine that
you like to suffer. Mental anguish is your favorite pastime. You
aspire to financial ruin. In that case, you will want to stock products
for your Internet retail store.
To stock products for your store, you will have to rent warehouse
space, or at least clean out your garage. You will have to have to
pay for a shipping account with UPS or FedEx, unless you want to
saddle up and trot down to the post office every day. Worst of all,
you will have to pay for those products up front.
Yes, thatís right. Money. Probably lots of it. For example, if you
want to sell Mattel Toys, you can contact Mattel and they will be
happy to set you up as a retailer. I knowÖI've talked to them. We
had a nice conversation about setting up an account, placing
orders, and all the other wonderful things businesspersons
discuss with each other when beginning a relationship. Toward the
end of our conversation, this nice woman said to me, in an offhand
manner, ďBy the way, your minimum first order must be at least
$100,000.Ē Thatís One Hundred Thousand Dollars, folks.
I nearly choked on my bagel. Needless to say, I do not stock
Mattel products. Or anyone elseís, for that matter.
Stocking products costs money, thatís the bottom line. No matter
what you sell, if you carry stock, you pay first, and then hope you
sell later. If you don't sell the products you buy, there are going to
be some very happy people at your next garage sale, and your
bank will be sending you an amazing amount of undesirable mail.
Thereís a much better way.
Stockless Retailers (Drop Shipping)
It should be noted here, if only to keep the Punctuation Police
happy, that if you use the method of drop shipping in your
business, YOU are not the ďdrop shipperĒ. The company(s) who
supply the products to your customers for you is the drop shipper.
YOU become a ďStockless RetailerĒ.
Hereís how drop shipping works.
1.) You open an Internet Store, with a shopping cart and the ability
to accept credit cards.
2.) You find a distributor who is willing to drop ship the products
you want to sell. The best place on the Internet for this is
Ship Source Directory is recognized as the best source for
legitimate wholesale drop shippers on the Internet.
3.) You establish an account as a retailer with the distributor you
4.) You receive images and descriptions of the products you want
to sell from the distributor, and post them on your Internet Store.
5.) A customer surfs into your Internet Store, and falls in love with
a product that you have priced at, say, $80. They purchase the
item with their credit card. Your Store charges their credit card
$80 plus your shipping fee.
6.) You turn around and email the order to your distributor, along
with the customerís name and address.
7.) The distributor sends the product directly to your customer, with
YOUR Storeís name on the package.
8.) The distributor charges you the wholesale price of, say, $45.00
9.) Your customer gets a cool product from your store shipped to
their door, and they tell all their friends about you, and you make
even more money.
There you have it. You just made a $35.00 profit on one item. You
didn't have to buy a whole bunch of the product and keep it in your
warehouse, hoping you would sell it. You didn't have to pay to have
it shipped to you, and then pay to ship it to your customer. All you
did was send an email to your distributor.
Thatís the drop shipping process in a nutshell, and we've placed
information in the Drop Ship Source Directory about everything
from setting up your store to accepting credit cards.
Worldwide Brands, Inc.