What is Dropshipping?
In an e-commerce model, the seller does not own any inventory or handle any shipping responsibilities. When a customer makes a purchase, the seller processes the order and transfers it to a third-party supplier—like a wholesaler or manufacturer, for example, prepares and ships the order. The seller only pays the supplier for an item after someone buys it, which makes dropshipping a popular option for entrepreneurs who want to start an online store quickly and with minimal overhead.
Example
Here’s an example of how dropshipping works:
Imagine you want to start an online store selling home decor items. Instead of purchasing inventory upfront and storing it in a warehouse, you use a dropshipping model.
You set up an e-commerce website and list products from various suppliers in your store’s catalog. These suppliers act as your dropshipping partners.
A customer visits your website and places an order for a set of ceramic vases.
Rather than fulfilling the order yourself, you forward the details to your dropshipping supplier, who stocks and ships the ceramic vases.
The dropshipping supplier processes the order, packages the vases, and ships them directly to the customer’s address.
The customer receives the vases, and you receive payment for the order minus the wholesale cost and any fees charged by the dropshipping supplier.
In this example, you act as the middleman between the customer and the supplier, handling the business’s marketing, sales, and customer service aspects while relying on the dropshipping supplier to handle inventory management, order fulfillment, and shipping logistics. Dropshipping allows you to start an e-commerce business with minimal upfront investment and operational overhead, making it an attractive option for entrepreneurs looking to enter the online retail market.