Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in all retail businesses, the retailers make their profit on the difference between the wholesale and retail price.

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. Other retailers may provide only a catalogue or website.Many sellers on online 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.

A new 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 keychains and t-shirts with custom logos or pictures to customized formulations for vitamins and nutritional supplements.Two main benefits of drop shipping are - no upfront inventory to purchase and a positive cash flow cycle.Other benefits of drop shipping include:

* Eliminates duplication of effort as only one warehouse will pick, pack and ship the product thereby reducing costs in the supply chain.
* Reduces total inventory management and shipping costs which can be passed on to the customer by the retailer.