What is Dropshipping? An Overview

Drop shipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Here’s how it works:

1. 1. Customer Places an Order: A customer places an order on the online store for a particular product.

1. 1. Store Relays Order to Supplier: The online store (acting as the dropshipper) doesn’t hold any inventory. Instead, they forward the customer’s order and shipping details to a third-party supplier.

1. 1. Supplier Ships the Product: The supplier, who actually has the product in stock, packages and ships the product directly to the customer. The customer typically won’t be aware they’re buying from a dropshipping business.

1. 1. Dropshipper Pockets the Profit: The dropshipper makes a profit on the difference between the wholesale price they pay the supplier and the retail price they charged the customer.

Essentially, the dropshipper acts as a middleman, connecting customers with suppliers and handling the marketing and customer service aspects.

Here are some advantages and disadvantages of the dropshipping business model:

Advantages

• • Low startup costs: No need to invest in inventory or warehouse space.

• • Wide range of products: Can offer a vast selection without managing physical products.

• • Scalable business: Easy to scale up or down based on demand.

Disadvantages

• • Lower profit margins: Profits come from the difference between wholesale and retail prices, which can be slim.

• • Less control over product quality and shipping: Reliant on the supplier to fulfill orders accurately and on time.

• • Potentially higher fulfillment costs: Shipping costs can add up, especially for international orders.

Drop shipping can be a good option for entrepreneurs who want to start an online store with minimal upfront investment. However, it’s important to carefully consider the pros and cons before diving in.