In order to have an understanding of drop shipping, you need to understand wholesale product distribution. Here's the scenario:
Located in sunny Southern California, Mr. Clean busily works day in and day out mixing up the best tooth whitening gum in the country. Since science is his talent, and he has found a way to make delicious tasting gum that will whiten and brighten a person's teeth without nasty tasting chemicals, Mr. Clean has no time to spend on marketing and distributing his amazing product.
Mr. Clean's longtime friend, Ms. White, loves the product and knows that everyone in the world cherishes white, shiny teeth. Ms. White has the time and resources and therefore has made it her purpose to bring Mr. Clean's tooth whitening gum to the masses. Ms. White buys cases and cases of gum from Mr. Clean for $5.00 a case. Mr. Clean is very happy about this and continues his work of making gum.
Now, Ms. White does not have a store in which she sells Mr. Clean's tooth whitening gum. She markets the gum to many different stores all over town. This gum is so extremely popular that it can be found on the shelves of any store a person shops in. Ms. White sells cases of gum to the store for $10 a case. Ms. White is happy because she has made $5 on each case of gum - and she sells hundreds of cases every single week.
In the stores, the cases of gum are opened and 10 packs of gum are marked at a price of $4 each. Not only does this make the store owners extremely happy - they are making a $30 profit on each case after all; but every person who wants white shiny teeth is also happy because they have found a way to get what they want at a low low cost.
This, my friend, is the basic concept of distribution. The manufacturer sells to the distributor, who sells to the retailer, and the retailer sells to the customer. Now, where does drop shipping fit into all this? It's simple really. Today the world is full of web retail stores that act as any corner store selling Mr. Clean's tooth whitening gum. These stores are the retailer in the above scenario. If you drop ship items to your customers, you are most likely going to get items from a distributor such as Drop Ship Access. You will then calculate your profit margin, write up a nice description of the item you are selling, and you will open your web store for business.
The only difference in drop shipping and the traditional form of distribution is that, as the retailer, you are not investing large sums of money to purchase thousands of cases of Mr. Clean's tooth whitening gum. You don't have to pay for the merchandise you sell until the customer has paid for it. Talk about a win-win situation!