In the era of strong digital economy growth, drop shipment (also known as drop shipping) has become a popular business model chosen by many small and medium-sized enterprises. However, many people still do not fully understand what drop shipment is and how it differs from traditional sales models. This article will help you grasp this concept clearly.
Drop shipping and its benefits in modern e-commerce
What is Drop Shipment? Basic Definition
Drop shipment is a special retail model in which the seller does not need to store goods in their own warehouse. Instead, when a customer places an order, the seller purchases the product from a third party (supplier, manufacturer, or wholesaler), and that third party ships the product directly to the customer. The seller only acts as an intermediary between the supplier and the customer.
Easy-to-understand example: You are a broker selling paintings. When a customer wants to buy, you contact the artist, and the artist ships the painting directly to the customer. You only earn the difference between the wholesale price and the retail price, without owning or storing the painting.
How is Drop Shipment Different from Dropshipping?
Many people confuse drop shipment with dropshipping, but they have important differences:
| Criteria | Drop Shipment | Dropshipping |
| Timing of Purchase | Purchase after receiving customer order | Purchase after customer places order |
| Transaction Nature | Resale transaction (B2B2C) | Order fulfillment process |
| Seller’s Role | Third party in the transaction | Store owner, full responsibility |
| Warehouse Management | Supplier manages | Supplier or 3PL manages |
| Legal Responsibility | Shared with supplier | Fully on the seller |
Drop shipment focuses on the financial transaction aspect (wholesale-retail price difference), while dropshipping is a comprehensive order fulfillment process with greater legal responsibility.
Sharing legal responsibility and saving on warehousing costs
Benefits of Drop Shipment in Modern E-commerce
Warehouse Cost and Capital Savings
The biggest benefit of drop shipment is saving on operational costs. You do not need to invest capital in pre-purchasing inventory or renting warehouse space. Startup costs are very low – just a computer and internet connection are enough to begin business.
Easy Scalability
Since the supplier handles packaging and shipping, sellers can increase sales volume without proportionally increasing effort. You can focus solely on marketing and customer acquisition.
Diverse Product Catalog
Without needing to buy stock upfront, you can list a wide variety of products from multiple suppliers for customers to choose from. This makes it easy to adapt to market trends.
Reduced Inventory Risk
You do not have to worry about unsold stock since you only purchase when there is actual customer demand.
Drawbacks and Challenges
Despite many advantages, drop shipment also comes with challenges:
- Low profit margins: Due to low entry barriers, competition is extremely fierce, and commissions per product are small.
- Difficulty tracking goods: Working with multiple suppliers makes it challenging to update inventory status.
- Shipping complexity: If a customer orders multiple items from different suppliers, shipping costs can rise significantly.
- Supplier-related risks: Errors such as wrong delivery, damaged goods, or poor packaging directly affect your reputation.
Drop Shipment for International Businesses Targeting the Vietnamese Market
For international businesses looking to enter and sell in Vietnam, drop shipment is an attractive option thanks to its low startup costs, minimal inventory risk, and simplicity in logistics.
Vietnam’s booming e-commerce market (Shopee, Lazada, TikTok Shop) offers huge potential for quality products from abroad, but success requires careful planning:
- Choose reliable suppliers with fast, cost-effective shipping to Vietnam to meet local buyers’ expectations for quick delivery.
- Build strong, localized marketing strategies to attract Vietnamese consumers through platforms like Facebook Ads, TikTok, Google, and Shopee SEO.
- Carefully manage supplier relationships to ensure consistent product quality and timely fulfillment.
- Fully understand Vietnam’s legal, tax, and customs regulations (including VAT, import duties, e-commerce compliance, and consumer protection laws).
With the right approach, drop shipment allows you to test and scale in Vietnam with low risk while leveraging effective marketing to capture this fast-growing market.
Drop Shipment for Vietnamese SMEs: Easy Export, Low Cost
Contact Gmajor to Find Reliable Suppliers
Gmajor provides a platform connecting businesses with trusted suppliers worldwide, supporting Vietnamese SMEs in effectively applying the drop shipment model.
Gmajor offers comprehensive accompanying service packages:
- Operational Manpower: Professional support + 3 potential partners per month
- Negotiation Commitment: 6 partners + 3 negotiation sessions per month
- Internal Training: Comprehensive from partner sourcing to personnel training
- Advertising Packages: Increase global visibility on the Gmajor platform
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