The History Of DropshippingThe entire concept of dropshipping was actually created in the 1950’s. But the word “dropship or dropshipping” is relatively newer.

Dropshipping has simple roots though. It comprises of a warehousing distributor or wholesale manufacturer who is willing to ship individual orders directly to the consumer. The role of the dropshipper is to be the marketer and make sales.

Drop shipping has therefore been intended as a cost cutting fulfillment process that requires no stocking by the resellers aka dropshippers, who in turn can promote the manufacturer’s products in greater numbers because of the reduced set up costs. It can also be an ideal business model for those that don’t want to create their own products and would rather focus on marketing to new audiences or their own audience.

Lets go back. Way back!
It all began with mail order in the 1950’s. Mail order companies were born and their business consisted of mailing catalogs to every corner of the country and receiving orders and payments by mail. Then those orders would be either fulfilled in-house, or outsourced to a warehousing and distribution company, who would pick, pack and ship the goods – the drop shipper. Many door to door salesmen also used drop shipping manufacturers and distributors to fulfill customer orders.

The next major introduction of drop shipping into the supply chain as a fulfillment method came with the computer revolution. Manufacturing was the first to be impacted by the advent of computers, leading to the Japanese manufacturing revolution or Just In Time (JIT) production. Manufacturers would receive orders directly from retailers on the basis of how low those retailers were running on stock and inventories. This innovation didn’t just improve the logistics of the manufacturers and retailers, it also allowed retailers to accept pre-orders and payments from consumers, and then pass the order directly to the manufacturer for just in time production (one example is furniture stores). The manufacturer would then begin production and deliver the product to the retailer or directly to the consumer a few days or weeks later.

Then came the Internet, which essentially took over mail order, but also over many retailers. Amazon was the first to drop ship on the web effectively, using Seattle based book distributors who were willing to drop ship for the company. Amazon used drop shipping so successfully that it grew into the world’s largest retailer. Today Amazon has its own warehousing facilities, but still utilizes drop shipping for many of it’s products and even has dropshippers on their platform.

Drop shipping is essentially a cost cutting fulfillment solution, provided of course your drop shipper is selling at manufacturer or distributor prices.

Often Internet start ups confuse the advantages of drop shipping with the idea that any company that offers a drop shipping service will be good for them. If one of your competitors offered you to drop ship their goods at the SRP or just below the SRP, would you use them?

I hope your answer is NO.
For drop shipping to work, it’s still true that you have to be good at marketing (whether you become one or you already have experience) However today, due mainly to the Internet and the ease with which prices can be compared, you must also truly know how to brand your company to stand out from your competitors. Get creative like you were as a kid.