Dropshipping is a business model where a retailer (the drop shipper) sells products to customers without physically stocking the inventory. Instead, the retailer purchases products from a third-party supplier (the wholesaler or manufacturer) who ships the products directly to the customer. Here’s how it works:
- The retailer sets up an online store and lists products from the supplier in their store.
- A customer places an order for a product from the retailer’s online store and pays for the product.
- The retailer then forwards the order and the payment information to the supplier.
- The supplier packages and ships the product directly to the customer, with the retailer’s branding and information.
- The retailer earns a profit from the difference between the price they charged the customer and the cost they paid to the supplier.
Dropshipping allows retailers to sell products without the need for a physical store or inventory. The retailer doesn’t need to buy products upfront or handle shipping and fulfillment, which reduces the upfront costs and operational complexity. The supplier benefits by gaining more customers and sales channels without needing to invest in marketing and sales efforts.
Dropshipping can be an attractive business model for entrepreneurs who want to start an e-commerce business with low startup costs and minimal risk. However, it’s important to choose reputable suppliers and manage customer expectations to avoid issues such as delayed shipments, low-quality products, or poor customer service.