Dropshipping
Dropshipping is a model in which the seller does not hold inventory and a supplier ships orders directly to the customer.
Why it matters for ecommerce brands
Dropshipping removes inventory risk and upfront cash, but it hands control of speed, packaging, and stock accuracy to a supplier. Customers still hold the seller responsible for late or wrong orders. It suits testing new products or adding a long tail of SKUs you would not stock. For example, a brand can list 500 supplier products without buying a unit. But if the supplier ships in 7 days while your own stock ships in 1, those orders will draw more support tickets. Track supplier ship times like a 3PL SLA.
Origin
Dropshipping grew sharply in the 2010s as Shopify, launched in 2006, and cheap ePacket shipping from China, introduced in 2011, let sellers list goods without holding inventory.
Common questions
- What are the risks of dropshipping?
- The seller has less control over inventory accuracy, shipping speed, packaging, and quality, but the customer still holds the seller responsible. Supplier performance must be monitored closely.
- What is the difference between dropshipping and a 3PL?
- With a 3PL, you own the inventory and the 3PL stores and ships it for you. With dropshipping, the supplier owns and ships the inventory, and you pay for units only after they sell.
- How do dropshipping margins compare with holding inventory?
- Unit margins are usually lower, because the supplier's price covers its own holding and fulfillment costs. In return, you avoid buying inventory upfront and the risk of unsold stock.