What Is Dropshipping Business?

What Is Dropshipping Business?

Dropshipping – a fulfillment technique that slowly picks up the pace for e-commerce stores – is a convenient resource advantage for retailers. If you are a lover of e-commerce but still not skilled enough to participate in the logistics of designing, manufacturing, warehousing, packaging, and shipping products which is characteristic of being an e-commerce wholesaler, entering dropshipping could be a great platform to get started in your entrepreneurial journey. Having a third party deal with the logistics will enable you to have more time so that you can focus on building your brand and marketing your products.

What Is Dropshipping?

Dropshipping is an order fulfillment method of a business not holding the products it sells in stock. When the order is received, the seller sends it to another company that sends the product directly to the customer. The seller is an intermediary between the customer and the company having the product.

The straightforward methodology of selling goods over the internet and its order fulfillment allows you to set up a business without having to rent warehouse space, play with supply chains, or control inventory.

Further down, you will find out all the information about dropshipping, including what it is, advantages, and how to initiate your own dropshipping business now.

What is a Dropshipper?

A dropshipper is an individual or company that operates on the dropshipping system of purchasing inventory and logistics of fulfillment from a third party, rather than storing and shipping the items themselves.

Due to the fact that dropshipping is based on a third-party supplier to manage inventory storage and order processing, a dropshipping operation may be run by many employees or a single business owner.

How Does Dropshipping Work?

In essence, the dropshipping process is a partnership of the customer-facing store and the supplier.

There are two main ways of implementing a dropshipping business model. The first is to find a North American (or any other location in the world) wholesale suppliers (one or more) yourself through a supplier database. Some of the famous online supplier databases include AliExpress, SaleHoo, and Worldwide Brands.

If you don’t want to find suppliers for all products that you intend to sell, you can use an app that links you and your store to thousands of suppliers. To do this, use DSers, a Shopify app that helps freelance business owners to look for products to sell.

DSers enables you to go through AliExpress and import the items you like directly into DSers, which is linked to your Shopify store, with just a single click. After a customer purchases a product, you will be able to fulfill their order in the DSers app.

Thankfully, most of the dropshipping process is automated by DSers. Being the store owner, all that is required of you is to confirm that the details are accurate and click on order. The product is delivered from the AliExpress supplier straight to the customer, no matter where they may be on the globe.

Dropshipping is typically considered to be a hassle free way of getting rich. But it’s not. Similar to other e-commerce sites, dedication is needed to get your startup up and running and successful. When done right, dropshipping companies can become dependable and easy partners of growing e-commerce businesses to speed up the order and fulfillment processing.

How Does Dropshipping Work

Dropshipping Benefits

Here are several additional reasons why dropshipping remains a popular ecommerce business model for enterprises of all sizes.

1. Lower initial investment 

Perhaps the greatest benefit of dropshipping is that it allows to start an ecommerce store without spending thousands of dollars on stocked items. In the traditional sense, a retailer, whether brick and mortar or ecommerce, has to invest large amounts of capital in inventory.

In the dropshipping model, you do not have to buy a product until you have made the sale and have been paid by the customer. One can start dropshipping with a little money and become successful without big upfront inventory investments.

Moreover, since you are not required to sell through any stock that you have bought upfront as it is in other models, the risk associated with starting a dropshipping store is minimized.

2. Easy to start

With an online business, your life can be much easier without dealing with physical products. By dropshipping, you will not have to worry about : 

  • Either managing or renting a warehouse.
  • Pack and ship your orders.
  • Inventory is being monitored for accounting reasons
  • Managing returns and incoming shipments
  • Always ordering goods and work with stocks regularly.

3. Minimal overhead costs

Since you don’t manage the stock and fulfillment centers, this leads to low overhead expenses. As a matter of fact, some dropshipping stores, which run as home-based businesses, only require a laptop and some periodic expenses for their operations.

Over time, this will likely grow but will still be a small fraction of what a typical brick-and-mortar business would be.

4. Adaptable location

Dropshipping makes it possible for the business to flourish and be based almost anywhere with internet access. If so, you can manage your business as long as you are open to communications from the suppliers and can provide efficient services that meet customer expectations.

5. Expanded product offerings available for sale

As you do not need to stock the items that you sell, you can have a good collection of trending products to offer to your customers. Firstly, you have the luxury of constantly updating or even changing your dropshipping product list without concern for unsold inventory. If your suppliers stock a product, you can just include it in your listings at no extra cost.

6. Easier to test the market

Drop shipping contributes to fulfilling orders in two ways: for an entrepreneur who is launching a new store and also for a business owner who would like to find out if the customers’ appetite is strong enough for additional product categories, e.g., accessories and/or new product line. The main advantage of dropshipping is the possibility to list and sell products without purchasing large quantities of inventory first.

7. Scalability

At a usual retail store, it is necessary to work three times as hard if you have three times the orders. Using dropshipping suppliers will enable your business to expand with minimal extra work because the suppliers will take on most of the task of processing the additional orders, and therefore you won’t have a lot of incremental work and growing pains.

Sales growth will even create or at least change the current work, but companies that leverage dropshipping scale more rapidly than regular e-commerce businesses. You will be able to dropship on many platforms, including Amazon, eBay, and Etsy.

Dropshipping Disadvantages

Everything that has been stated makes dropshipping an ideal model to start an online store for whomever or for those looking to expand the range of the products they offer. But similar to any strategy, dropshipping has its minuses as well. In many cases, high degrees of convenience and flexibility raise the prices of these services.

The following are a few issues to keep in mind while you want to launch a drop shipping business.

1. Slim profit margins

Low profitability is one of the major disadvantages of retailing in the cutthroat and shrill fashion scene. Dropshipping is so easy to launch and minimal to start as such, the business getting started will not have a hard time setting up the shop. As expected, the costs are so little. Many competing businesses will set up dropshipping stores and sell items at rock-bottom prices in an attempt to increase revenue. As they do not need to raise much capital to launch the business, they could use any little income to even out the smallest margins.

Generally, these dealers will have websites of questionable quality and bad (if there is any) customer service, which can be a way to distinguish your dropshipping business from others. However, this won’t stop the customers from seeing the price differences they are facing. The competition will significantly hurt the turnover and potentially minimize the profit margins in the niche. 

However, if you choose to dropship from the wrong source then there would be a challenge of not getting the product you want from where you want it. Nevertheless, making the right choice and picking a niche with an appropriate dropship strategy is the way to go.

2. Challenges with inventory

If you have all of your stock, it’s quite easy to know which products have been sold out and restocked. However, when you are sourcing from several warehouses, the other merchants are also using those warehouses just for their purposes and inventory can change daily.

Fortunately, there are a few apps that let you connect with suppliers. Dropshippers can do front-office work such as entering customer orders in a dropshipping vendor’s system one or two times with a click of the mouse and getting immediate feedback in real-time on how much inventory the supplier has.

3. Complications with shipping

When you work with multiple suppliers – which most drop shippers commonly do – your online store products will be sourced through a range of different drop shippers. That’s why you have no say in your supply chain.

An example is when the customer makes an order for three items which all come from different suppliers. After sending each item to the customer, there will be three different shipping costs you’ll have to incur, regrettably, it may not be a smart idea to add this charge on top of the customer’s cost. And more often than not even when it is the case needing the charges for the delivery, calculation of the dropship costs can be complicated.

4. Mistakes by suppliers

Even the best dropshipping suppliers may commit some slight order fulfillment mistakes, for which you have to be apologetic and assume responsibility. In addition, less qualified and poor suppliers will worsen customer experience through missing items and shipment mistakes (dropshipping), as well as low packing or product quality, which might harm the business’s reputation.

5. Lack of personalization and branding

In contrast with handmade or print-on-demand, dropshipping doesn’t let you have control of the product. As a rule, the supplier brands and designs the product dropped shipped.

Some dropshipping suppliers can manage your business’s product changes. Nevertheless, by this point, they have control over the very product. Most likely, the manufacturer will require a minimum order quantity to offer the product with planned and cost-effective modifications.


Dropshipping comes with a variety of challenges you will have to find your way to solving as an entrepreneur. However, do not forget that with wise planning and thinking you can predict those issues and make your dropshipping business successful and profitable enough. 

If you are thinking of starting a dropshipping business, register your business with experienced corporate agency like FastLane will save you a lot of trouble. With our professional Company Incorporation service, our experts can help you avoid the pitfalls that many new companies or businesses fall into. At Fastlane, our team of experts has helped many companies with our corporate services like company registration, visa application, taxation, accounting, and audit
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