Dropshipping is a retail business model where an online store sells products without keeping any inventory on hand. Instead, when a customer places an order, the store forwards the order details to a third-party supplier-such as a manufacturer, wholesaler, or fulfillment house-who then ships the product directly to the customer
. Key points about dropshipping:
- The retailer acts as the seller of record, setting prices, collecting payments, and handling customer service, but does not handle the physical product
- The supplier manages inventory storage, packaging, and shipping, which removes the need for the retailer to invest in warehouse space or manage stock
- This model reduces overhead costs and initial investment, making it attractive for small businesses and entrepreneurs
- Dropshipping allows retailers to offer a wide variety of products without the risk of unsold inventory
- However, it comes with trade-offs such as lower profit margins, less control over product quality and shipping times, and potential supply chain issues
The dropshipping process typically involves:
- A customer places an order on the retailer’s online store.
- The retailer forwards the order to the dropshipping supplier.
- The supplier packages and ships the product directly to the customer.
- The retailer profits from the difference between the customer price and the supplier’s charge
This model has grown significantly in ecommerce, with dropshipping estimated to generate hundreds of billions in sales globally
. In summary, dropshipping enables entrepreneurs to run online retail businesses without managing inventory or shipping logistics, focusing instead on marketing and customer acquisition
