What is Dropshipping?
Dropshipping is a business model where the retailer doesn't keep the products in stock. Instead, they partner with a manufacturer or supplier who holds the inventory and fulfills orders on behalf of the retailer. When the retailer makes a sale, the supplier ships the product directly to the customer.
How Does Dropshipping Work?
The dropshipping process involves three main players: the retailer, the supplier, and the customer. The retailer sets up an online store and lists the products they want to sell. When a customer places an order, the retailer forwards it to the supplier who then ships the product to the customer. The retailer earns a profit by selling the product at a markup price.
Advantages of Dropshipping
- No need to hold inventory
- Low start-up costs
- Flexible location and work hours
- Wide range of product selection
- Ability to test new products without committing to inventory costs
Challenges of Dropshipping
- Higher product costs due to the supplier taking care of inventory and shipping
- Difficulty in controlling product quality and shipping times
- Competitive market with many dropshippers selling the same products
- Dependency on supplier for smooth operations
- No control over shipping and handling processes