Dropshipping is an order-fulfillment model in which an online seller takes the customer's order and payment, then passes the order to a supplier who packs and ships it directly to the customer.
Why it matters
It lowers the upfront cost of starting a store because there is no inventory to buy. In exchange, margins are thinner and the seller has less control over product quality, shipping times and stock levels, yet is still the one customers contact about problems. Because the seller never touches the goods, the main skills are choosing reliable suppliers, setting clear delivery expectations and handling customer service when a supplier fails.
Example
A store sells a desk lamp for 35 USD. The supplier charges 20 USD including shipping. After a 3 USD payment fee, the seller keeps 12 USD, minus advertising cost. If the supplier runs out of stock, the seller must refund the customer.
Common mistakes
- Not ordering a sample to check quality and delivery time.
- Ignoring the cost of advertising when calculating profit.
- Relying on a single supplier with no backup.
Related
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