Definition

Dropshippers are people who use dropshipping: A retail management technique in which the seller does not actually stock any of the items being sold. Instead, the seller transfers all customer orders to a wholesale supplier -- or sometimes even the manufacturer -- and that supplier ships the goods directly to the customer. In effect, the seller "drops the shipping" on the supplier.

Alternate Definition

"Dropshippers" is also the term sometimes used for dropshipping suppliers themselves, rather than the sellers. Dropshipping works the same way as in the example mentioned above, but in some cases, the seller is simply referred to as "the seller" or "the retailer," and the supplier or wholesaler is referred to as "the dropshipper." It is generally easy to figure out which definition is being used through context.

Popularity

Dropshipping increased rapidly in popularity in the 1990s and 2000s as the Internet went from a novelty to a necessity. With a widely increased online customer base and widely increased wholesaler base, opportunities for dropshipping were easily available, and many new dropshipping businesses were launched.

Retailer Benefits

Dropshipper sellers who buy from wholesalers or manufacturers can offer goods at a marked-up price. The difference between the higher price that retailers sell at and the lower price of acquisition is the profit for the dropshipping seller. The retailer essentially gets the monetary benefit of being a middleman without the responsibility of having to fulfill the order.

Wholesaler Benefits

Dropshipping offers wholesalers and manufacturers a widely expanded market to which they can sell their products. For companies that do not have the time or money to hire a large sales force and market to the world, dropshipping allows enterprising retailers to serve as an impromptu sales force for the dropshipper supplier. The supplier can focus on efficient production and cheap shipping while the retailers blanket the world and do all of the advertising and selling.

Turnkey Dropshipping

In the late 2000s, a number of Web sites were created in order to sell the ability for others to become dropshipper retailers. These sites offered to provide the retailer with a ready-to-go Web site and dropshipping supplier. Because of the retailer benefits mentioned above, many people jumped on the bandwagon, creating standalone dropshipping Web sites and offering items through dropshipping on eBay.

Warning

Because of the proliferation of dropshippers in the mid to late 2000s, the supply of dropshipping retailers has started to outstrip the demand. For this reason, becoming a dropshipper seller is not necessarily as profitable as it once was. Back orders are also a problem. It occurs when the retailer takes an order the wholesaler cannot fill at the time. This results in frustration for the customer and retailer and possibly the loss of money.