Drop Shipping

What is Drop Shipping?

Drop shipping is a fulfillment model where the retailer (you) never actually own the inventory you’re selling. Instead, you’re acting as a middle man that sells the goods and when you receive an order, you pass that order onto the drop shipping company for them to pick, pack and fulfill. Your profit is the difference between what you charge your customers and what the drop shipping company charges you.

How does Drop Shipping Work?

Drop shipping is fairly straightforward but we’ve created the image above to give an overview of what a drop shipping transaction looks like.
A customer makes a purchase through your store.
You receive the order and either manually or automatically forward that order on to your drop shipping partner.
Your drop shipper packages the order and sends it to your customer on your behalf.

What are the Benefits of Drop Shipping?

​The biggest benefit of drop shipping is the very low startup cost and the ability to offer a large selection of products without purchasing inventory upfront and managing that inventory. Drop shipping can also be a great tool to help diversify your inventory and test products since it’s just a matter of adding the new product to your store.
The drop shipping business model has a number of advantages, including:
  • Lower Capital Requirement: With drop shipping, you don’t need to invest thousands of dollars into inventory. Instead, you only purchase a product when you have an existing order to fill.
  • Wider Product Selection: When you don’t have to pre-purchase all the items you sell, you can offer a significantly larger number of products to your customers.
  • Reduced Risk: Without thousands of dollars invested in inventory the risk involved is dramatically reduced. If things don’t work out you aren’t stuck with thousands in inventory you have to sell at a loss.
  • Location Independence: Because you don’t have to worry about fulfillment or running a warehouse it’s possible to run a drop shipping business from anywhere with a laptop and an internet connection.
  • Highly Scalable: Because you don’t need to manually fulfill each order it’s relatively easy to scale a drop shipping business. The work is almost the same for you whether you sell 5 units or 500 units.