Dropshipping

What is dropshipping?

Dropshipping is an ecommerce business model in which the merchant does not hold physical inventory of the products they sell.

Instead, when a customer makes a purchase, the merchant forwards the order directly to the supplier or wholesaler, who handles storing, preparing, and shipping the product to the end customer.

This approach allows the seller to focus on customer acquisition, marketing, and customer service, without having to manage inventory logistics and shipping.

Important considerations of dropshipping

• Lower profit margin: profits per unit are usually lower than in models with their own inventory.

• Limited control over inventory and shipping: dependent on the supplier’s timing and quality.

• Potential stock conflicts: if the supplier does not update availability in real time, errors in orders may occur.

• More complex customer service: returns and claims must be handled even though the product is not physically managed.

• High competition: as an accessible model, many businesses can offer the same products, reducing differentiation from competitors.

Use cases and applications of dropshipping

Dropshipping has become especially popular in the following sectors:

• Niche stores: businesses that want to sell very specific products without committing to maintaining large inventories.

• International ecommerce: companies aiming to sell to customers in different countries without having local warehouses.

• Entrepreneurs and startups: looking to launch an online business with minimal initial investment.