DROPSHIPPING

Decoding the Drop Shipping Supply Chain

Decoding-the-Drop-Shipping-Supply-Chain
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Role of Manufacturer, Wholesaler, & Retailer in Drop Shipping 

The supply chain is a term referred to show the journey of a product from the 1st stage of conceptualization to the last stage of consumption. Before even sowing the seed into the ground, it is conceptualized, and then the process begins. Sowing, nurturing, harvesting, processing in the mill or any manufacturing unit, packing, distributing, and consuming. 

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Throughout these stages, a single product changes many hands and ports to reach the market where it is demanded. All in all, the core of a supply chain is demand. If there is enough demand for a product, it will be supplied. 

The entire mechanism of drop shipping rests on this process of demand and supply. An industry worth $102 Billion in 2018, is estimated to grow at a CAGR of 28.8% until 2025. In this business, you become the bridge between the consumer and the manufacturer, helping either of them fulfill a purpose. 

Role of Supply Chain in Drop Shipping

Supply Chain in dropshipping is the most crucial part of the business. For instance, you have a Shopify store wherein you are selling jewelry items in America. Capitalizing on the demand generating out of the USA, a drop shipping business owner connects the customer with a product of their choice without ever buying the product himself.  He is just an intermediary who connects the two ends and plays the role of a mediator who oversees that the transaction is fulfilled on time and accuracy. 

Knowing the Drop Shipping Trifecta – Manufacturer, Wholesaler, Retailer

Manufacturer

The manufacturer is the primary link in the chain that creates, modifies, or alters the product on a large scale. However, the manufacturer does not deal directly with the public and only transacts with the wholesalers.  Sometimes the manufacturer might work as a wholesaler too. It is worth mentioning that the manufacturers have a minimum buying requirement.  So, as a dropshipping business owner, it is not conducive to contacting the manufacturer if you do not have a large order. 

 

Wholesaler

This will be your key point of entry into the dropshipping business. Wholesalers are the significant players in the market who can buy products in large quantities from the manufacturers. 

It depends on the type of transaction and understanding between the manufacturer and the wholesaler as who will be responsible for the delivery. 

When wholesalers receive the product, they rely on the retailers to buy from them. Yes, the wholesalers can also sell to the consumer directly, but that also depends on the market to market. 

 

Retailer

This is where the drop shipping business comes in. The best part about dropshipping is that in any part of the supply chain, you are never going to invest in buying the product. All you have to do is connect the customer to the supplier. 

A retailer connects with the customer directly. In terms of business transactions, you are a retailer. Because the customer will buy the product from you and not the supplier from whom you are going to source it.

It is your choice from whom to buy the product and get them to ship the product to the customer. It can be a retailer (low-profit margin) or a wholesaler (high-profit margin). 

Dropshipping is a Service-oriented Business

A drop shipping business is service-oriented because your storefront is the medium for a customer to connect with the wholesaler or retailer. Even though the drop shippers are invisible, they play an essential role in ensuring connecting the patrons of the supply chain. Thus, they help consumers find the right product, and the wholesalers find the right customer while making a profit out of each sale done through the dropshipping website.

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