Drop Shipping Fashion: Drop Shippers by Apparel Search - Terms of Interest to the Fashion Industry
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Drop shipping is a technique in which the retailer (seller of clothing or fashion accessories) does not maintain merchandise in stock for sale to consumers. Instead they take orders from consumers and then transfer the customers orders and shipment details to a third party. The other company which actually owns the product, will then fulfill the order by shipping directly to the consumer.
For example, a consumer purchases a pair of red shoes from the Jane's Corporation. Because the "Jane's Corp" does not actually own the red shoes they just sold to the consumer, they pass along the order details to "Bill's Corporation" (the drop shipper). Then "Bill's Corp" the company that actually owns the red shoes will ship the shoes directly to the consumer.
The consumer will pay the retailer (Jane's Corp.) and the retailer will pay the wholesaler (Jane will pay Bill). As all of this takes place the consumer has no idea that Bill's Corp is actually involved (unless that is OK with the retailer).
Note: the payment terms between the retailer and drop shipper may vary. Often consumer payment will go direct to the retailer. However, it is possible that the consumers payment will go directly to the wholesaler, and then the wholesaler will make a payment of commission to the retailer.
This is a win-win situation for all involved. The consumer gets the product they wanted. The retailer, sold a product that they did not actually have to own... And the wholesaler (or manufacturer), sold product without having to own a store or have to hire sales people to sell direct to consumers...
In a typical drop shipping situation the consumer has no idea where the product is actually coming from. Many drop shipping arrangement are done in a private label method. The consumer will buy product from a particular website, catalog, or store. They will then receive product in a timely manner (hopefully). The consumer does not actually need to know the point of origin of the product (where it was warehoused or which company official owned the product).
As in all retail businesses, the retailers will make their profit on the difference between the wholesale and retail price. In the drop ship situation, it is beneficial for the retailer because they earn a profit without the risk of owning the inventory.
The practice of drop shipping product has been around for a long time. However, it appears to have gained popularity in the age of the internet. Due to the fact that it is relatively easy to create a clothing retail website, many entrepreneurs have sprung up to take advantage of the growth in online fashion retailing. Due to the fact that developing the website is easy, but owning inventory is expensive, drop shipping became the perfect solution. Because there is a growing need for "drop shipping", there becomes a growing need for "drop shippers". The drop shippers are the companies that will take orders from retailers and then ship product direct to the customers.
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 effected 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.
A rather common emerging trend in the drop ship business is private label drop shipping, in which a manufacturer produces a custom item for a retailer and drop ships it. The range of private label drop shipped items varies from simple key chains and t-shirts with custom logos to virtually any other type of product.
Do brick and mortar clothing stores use drop shipping?
The answer to this question is "yes". Some, traditional clothing stores will use a drop ship method. Typically, they will use this technique for "portion" of their store assortment. This allows the retailer to maintain a lower inventory cost. For example, a fashion boutique may wish to stock blouses in sizes in only S, M, L but offer additional sizes via a drop ship service. The sales associate can then inform consumers that although the store does not currently have their size in stock, they can order the size and have it dropped shipped to their home.
Although it is more common to use drop shipping for a portion of the stores product offering, it is potentially possible to run an entire store based on the utilization of drop shippers. If a brick and mortar store is using drop shipping technique for all clothing categories in the store, they will generally take ownership of some product to display in the store. Rather then sell the garments out of the store, they will simply use the small amount of inventory as show pieces (as samples for presentation). In other words, some drop shipping retailers may keep "show" items on display in stores, so that customers can inspect an item similar to those that they can purchase. After the consumer decides which garments they would like to purchase, the product can be mailed directly from the drop shipper to the customer. Again, having an entire off-line store that utilizes drop shipping is rather rare. It is more appropriate for online retailing.
It is very easy for website developers to create retail websites for selling product. Therefore, clever manufacturers, distributors and other types of entrepreneurs, have been turning to drop shipping in increased numbers. Many online clothing retailers will use a mix of maintaining their own inventory and utilizing fashion drop shippers.
Many sellers on online apparel auction sites, such as eBay, also drop ship. Often, a seller will list an item as new and ship the item directly from the wholesaler to the highest bidder. The seller profits from the difference between the winning bid and the wholesale price, minus any selling and merchant fees from the auction site. A seller is permitted to list items that are currently not in his/her own possession, provided that he/she follows eBay's policy on pre-sale items.
Two main benefits of drop shipping are - no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer's money, but has not yet paid the wholesaler.
Other benefits of drop shipping include:
As in any business, some risks are involved in drop shipping. For example, back ordering may occur when a seller places a shipment request with a wholesaler, but the product is sold out. Back ordering may be accompanied by a long wait for a shipment while the wholesaler waits for new products, which may reflect badly on the retailer. A good wholesaler will keep retailers updated, but it is the business owner's job to be aware of the quantities that the wholesaler has available.
You may also want to learn about fashion affiliate programs. Fashion affiliate methods have an element of drop shipping. Some affiliate programs are run as a private label program but others make it very clear which company is shipping the product.
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What fashion brands would you like drop shipped? Can't promise it will be done, but it's good to dream...