Dropshipping
Also known as: Drop Shipping, Drop Ship
Definition
Dropshipping is a retail model where the seller doesn’t keep inventory. When a customer places an order, the seller purchases the item from a third-party supplier who ships it directly to the customer. The seller never handles the product.
How Dropshipping Works
- Customer orders - Buys from your store
- You forward order - Send to supplier
- Supplier ships - Direct to customer
- Customer receives - Often unaware of dropshipping
Your profit = Retail price - Supplier cost - Platform fees
Dropshipping Pros and Cons
| Pros | Cons |
|---|---|
| Low startup cost | Lower profit margins |
| No inventory risk | Less control over shipping |
| Easy to test products | Quality control challenges |
| Location independent | Supplier dependency |
| Huge product selection | Competition is fierce |
Common Dropshipping Models
Supplier Dropshipping
- Partner with manufacturers/wholesalers
- Better margins than aggregators
- Requires relationship building
- Examples: Direct from brands, Faire wholesale
Marketplace Dropshipping
- Use platforms like AliExpress, CJDropshipping
- Easy to start
- Longer shipping times (often 2-4 weeks)
- Lower quality control
Print-on-Demand
- Products printed when ordered
- Custom designs on apparel, mugs, etc.
- Providers: Printful, Printify, Gooten
- Good for creative/unique products
Shipping Challenges in Dropshipping
- Long transit times - Especially from overseas suppliers
- Multiple suppliers - Split orders = multiple shipments
- Tracking inconsistency - Different carriers, tracking systems
- Branded packaging - Harder to achieve
- Returns complexity - Customer sends to you or supplier?
Dropshipping Best Practices
Choose reliable suppliers:
- Check reviews and ratings
- Order samples first
- Test shipping times yourself
- Verify communication responsiveness
Set shipping expectations:
- Be honest about delivery times
- Communicate potential delays
- Use ePacket or faster shipping options
- Consider US-based suppliers
Handle returns carefully:
- Clear return policy
- Decide: refund without return vs. return to supplier
- Factor return costs into pricing
Transitioning from Dropshipping
Many successful dropshippers eventually:
- Buy inventory for bestsellers
- Use 3PLs for faster shipping
- Create private label products
- Build supplier relationships for better terms
This hybrid approach combines dropshipping flexibility with the speed and quality of holding inventory.
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