Dropshipping is an order fulfilment option that allows eCommerce businesses to outsource procuring, storing, and shipping products to a third party—typically a supplier.
The dropshipping model commonly appeals to entrepreneurs seeking efficiency and low overhead, but it can come at a cost. This guide will cover what dropshipping is and explore how this fulfilment method can work. We’ll also look at a few alternative fulfilment models.
What is a dropshipping business model?
In a dropshipping business model, you promote products and provide an online storefront. When a customer places an order, you send the order to the drop shipper and inform customers the products are on the way. The rest of the physical fulfilment process is out of your hands. In some dropshipping agreements, you may also handle customer service, while the dropshipping service manages the physical goods and fulfilment.
How does dropshipping work?
The exact logistics of dropshipping depend on your arrangement, but typically the dropshipping process follows this general sequence:
- Seller signs agreement with a drop shipper.
- Customer orders online.
- Seller receives the order.
- The customer receives an order confirmation.
- The seller forwards the order to the drop shipper.
- Dropshipper ships the order.
- The customer receives their product.