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What is Drop Shipping?

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Drop shipping is an order fulfillment practice in which retailers sell products, usually through online channels, and then source them directly from a supplier, typically a wholesaler, manufacturer or another retailer.

Instead of buying stock and storing it, the retailer only purchases an item (from the supplier) after it’s been sold to an end consumer. In turn, the supplier picks, packs and ships the product straight to the end consumer, on behalf of the drop shipper.

The drop shipping business model has many benefits including the ability to sell products without having to purchase them upfront, but it also has some disadvantages, details of which will be outlined in this guide.

What’s covered? – What is drop shipping, the benefits of drop shipping, the cons of drop shipping, how to get started with drop shipping

How Does Drop Shipping Work?

Typically, products are pre-sold to consumers by a retailer and then sourced directly from a manufacturer, wholesaler or sometimes another retailer. When a drop shipper sells an item, they order it from their supplier who then picks, packs and ships the product straight to the end consumer, on behalf of the drop shipper.

Example of dropshipping:

  • Tom runs an online store selling DIY tools.
  • When a customer buys a product from Tom, they pay him directly e.g. £29.99
  • Tom then orders the product from his supplier for the lower (usually wholesale) price e.g. £19.99
  • The supplier then picks, packs and ships the product directly to Tom’s customer.
  • Tom earns a £10 (£29.99 – £19.99) profit (minus any expenses) in the process.

What are the Benefits of Drop Shipping?

Drop shipping has a vast range of benefits. Not only does it allow anyone to immediately launch an e-commerce business without investing thousands of dollars on stock, but it’s also much less time consuming compared to the traditional buy and resell model. Learn more about the benefits of drop shipping here.

What are the Cons of Drop Shipping?

There’s no denying that drop shipping is a lucrative business model. However, it also has its fair share of disadvantages. Stock management is an issue for many due to having no control or insight into stock levels. Lack of control over product quality, packaging and dispatch times can also be a challenging aspect.

Learn more about the cons of drop shipping here.

Can Anyone Start a Drop Shipping Business?

Due to the low start-up costs and thanks to platforms like eBay, literally anyone can start a drop shipping business. The supplier handles most of the time consuming aspects of the business, therefore, even those with limited time can start and successfully build a drop ship business.

How do People Sell Drop Ship Products?

Many people go down the route of selling drop ship products on eBay and or Amazon. There are also thousands of people who use the model to sell through an e-commerce website. You’d be surprised as to how many well-known and established companies source products rather than physically stock them.

Whilst eBay and Amazon are great to launch a start-up business, building your own e-commerce website is the key to achieving long term success and building a sustainable income with drop shipping.

How Can I Get Started With Drop Shipping?

The first and most important step is to find a supplier. However, there are also some other essential steps you must take to successfully start and launch a drop shipping business. You can learn more about them here.

Final Thought

Drop shipping in no way offers a shortcut to success in e-commerce. It does however allow those with limited income or time to launch an e-commerce business quickly and without investing thousands on stock, storage space and retail space. It’s particularly suited to those who don’t have a lot of time to spare fulfilling orders.

  1. Evacomtechuk
    |

    Massively insightful. Many thanks.

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