Instead, in a form of supply chain management, the seller transfers the orders and their shipment details either to the manufacturer, a wholesaler, another retailer, or a fulfillment house, which then ships the goods directly to the customer.
[2] Amazon, the online shopping giant, found early success in a drop shipping business model where they could offer over a million different books to consumers while only keeping approximately 2,000 of the more popular titles in stock.
Likewise order fulfilment and shipping delays are beyond the seller's control, yet can reflect badly on the purchaser's ultimate satisfaction with their transaction.
[citation needed] The economics of dropshipping can be complex and depends on a number of different factors such as cost of goods, handling and shipping fees, marketing and advertising expenses, profit margins and scale or efficiency.
Furthermore, in order to attract customers, dropshippers invest in marketing and advertising campaigns such as social media ads, influencer partnerships and search engine optimization.
[6] With the ever growing relevancy of drop shipping, this business model has become increasingly popular with the rise of e-commerce platforms and the ease of global trade, from China especially.
[11] Subsequently, with these platforms continually expanding, China has experienced exponential economic growth, leading to increased disposable income for its citizens.
[13] The combination of these factors have manifested an extensive domestic platform for e-commerce, supplying greater opportunities for drops shipping businesses to expand.
A distinct example can be identified when the government established special economic zones and implemented tax incentives to encourage e-commerce and export-specific industries.
[16] Scam artists will promote drop-shipping as a work-at-home scheme, in which victims will be sold a list of businesses from which drop shipment orders can be placed.