Benefits
Two significant benefits of drop shipping are the elimination of upfront inventory and a positive cash-flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer's money, but has not yet paid the wholesaler.
Drop shipping also eliminates some duplication of effort, since only one warehouse will pick, pack and ship the product. This approach can reduce total inventory management and shipping costs. These cost reductions can subsequently reduce the price to the consumer.
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