Dropshipping is a retail business model where an online store sells products to customers without holding any inventory. Instead, when a customer places an order, the store forwards the order details to a third-party supplier—such as a manufacturer, wholesaler, or dropshipping platform—who then directly ships the product to the customer. This model allows the store owner to operate without the costs and complexities of buying, storing, or shipping products themselves. How dropshipping works in practice is as follows:
- The retailer creates an online store and lists products for sale from one or more dropshipping suppliers.
- A customer places an order on the retailer’s website.
- The retailer forwards the order and payment details to the dropshipping supplier.
- The supplier packages and ships the order directly to the customer, using the retailer's branding on invoices and packaging slips.
- The retailer handles customer service, pricing, and compliance with local laws, while the supplier takes care of inventory management and shipping logistics.
This model offers a low-risk way to start an ecommerce business, as there is no need to invest upfront in inventory or warehouse space. However, the seller has less control over product quality, shipping speed, and customer experience since the supplier manages those aspects. Dropshipping is popular because it simplifies order fulfillment and reduces overhead costs but requires good coordination with suppliers and effective marketing by the retailer.
