How Dropshipping Works?

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How it Works?

Dropshipping allows you to sell products with less investment at the beginning. The trade-off for this reduced risk is less control over the fulfillment process. In addition, your profits on each sale will be lower.

  1. You place items from a manufacturer in your online store. You don’t buy inventory.
  2. When you receive an order, you relay it to the manufacturer.
  3. The manufacturer ships orders directly to your customers. You never own the merchandise you sell. This is the essence of drop shipping.
  4. You split the profits with the manufacturer. Your cut is less when you drop ship than when you maintain your own inventory. Should you outsource your eCommerce fulfillment? Perhaps your orders are flat, and you have a solid in-house order fulfillment process. In that case, you might not need to outsource your eCommerce fulfillment. As your business expands, however, the in-house solution can become a drag on your growth. Outsourcing your fulfillment can be an economical way to support the expansion of your online store.

Some advantages of outsourcing your eCommerce fulfillment include:

  • Flexible shelf space that can scale up quickly as you grow.
  • Your orders will be picked and packed by trained professionals who specialize in order fulfillment.
  • Your resources are freed up to pursue business development.
  • You aren’t stuck with a lease for expensive space you might not need.
  • You can choose a centrally-located fulfillment warehouse that’s able to ship orders to your customers more quickly.

Is It Worth It?

As we initially warned, dropshipping is not a perfect, stress-free way to build a successful business. The model has some definite advantages but comes with a number of built-in complexities and problems you’ll need to be able to address.

We’ll be examining these problems – and how to best address them – in future chapters. The good news is that with some careful planning and consideration, most of these problems can be resolved and need not prevent you from building a thriving, profitable dropshipping business.

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