How Does a Dropshipping Business Work?

In more simple terms, dropshipping works like this:

1. A customer purchases an item from your store at retail price
2. The order is forwarded to your supplier (you pay wholesale price)
3. The supplier ships the item directly to the customer under your business name

This means that you – the dropshipper – don’t have to buy and store bulk stock, which saves you having to invest a lot of money upfront.

It also eliminates the risk of buying in bulk and not being able to sell all of the products, leaving you out of pocket.

This is why dropshipping is so popular – it requires minimal investment, but reaps similar benefits to traditional retail models.

How Does a Dropshipping Business Work?

Dropshipping or drop shipping is another name for price arbitrage; a fancy term that means you find low-cost products and sell them at a higher price.

With a dropshipping business, you don’t need cash or storage space. You just need to set up your store, list your products, and focus on marketing and selling.

So how to dropship? It works like this:

First, you find and source a product with a low wholesale price from a supplier. Then, you place that product on your store and list it for a higher retail price.

When your customers purchase the item, you take their orders and send these to your supplier. The supplier sends out your goods directly to your customers and you keep the difference between what you bought and sold the product for.

The great things about dropshipping:

• It’s easy to set up a store.
• You don’t have to worry about inventory.
• There’s little risk to you as the seller.
• There are millions of products you can sell.
• It’s possible to have a dropshipping business anywhere in the entire world.

The hardest part of being a new dropshipper is finding the right product and supplier.

Not only do you have to find a product people want to buy, but you also need to ensure that your supplier will deliver exactly what you advertise to your customer.

This is extremely important because you want to ensure your product arrives in a good condition, meets all of the customer’s requirements, is shipped quickly, and will not be returned.

The top suppliers will even include your company’s marketing materials to make it seem as if you sent the product yourself!

Working with sketchy suppliers can ruin your business’ reputation or cause you to lose money, so make sure you choose the right supplier or service before you start your business.

Choosing profitable suppliers from your preferred country is extremely important too. For example, if you wanted to use dropshippers from Canada, make sure that the directory you use has a list of reputable suppliers from Canada that can dropship products in your preferred niche.

To help you get started on the right track, we’ve reviewed 16 of the top directories and search platforms.

Why directories?

Because they authenticate and vet their suppliers to ensure you only find the absolute best, based on product quality, price, and legitimacy. You get to avoid fraud for pennies on the dollar.

Types of Dropshipping Business

• Print on Demand: You design graphics to be printed on products such as t-shirts and mugs and then find a supplier who will produce and print your designs to dropship them to customers on your behalf. This is a great option if you don’t want to carry stock or invest a lot of money on inventory upfront.
• Private Labeling: You find suppliers who will brand their products with your own logo and then dropship them. The big upside here is that you can sell products that are unique to your own brand.
• Reverse Dropshipping: This is an emerging form of dropshipping where dropshippers sell high quality products made in countries that usually import, to countries that usually export. An example of this could be to find a high quality niche product that a US supplier produces and then selling it to the Chinese market.
• Product Reselling: This may be the most common type of dropshipping. This is where you find existing products to list and sell for a profit, but the supplier fulfills the order on your behalf so you never have to have the product on hand.