In a drop shipping model, the retailer does not hold inventory or have to bear the costs of storing products. Instead, the drop shipping supplier or wholesaler typically covers the cost of inventory and storage.
The supplier is responsible for purchasing and maintaining inventory levels of the products they offer for drop shipping. They store the inventory in their own facilities or warehouses until an order is received from the retailer.
The retailer, on the other hand, does not need to invest capital in purchasing inventory upfront or allocate space for storage. This eliminates the need for the retailer to handle inventory management, logistics, and associated expenses such as warehousing, inventory tracking systems, or staff for inventory handling.
By relying on the drop shipping supplier for inventory and storage, the retailer can focus on marketing, selling, and managing customer relationships. This allows the retailer to operate with lower overhead costs and reduced risk, as they are only required to pay for the products when a customer places an order.
As the retailer does not carry the physical inventory, they can benefit from the flexibility of offering a wide range of products without the financial burden and risk associated with warehousing and inventory management
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