Dropshipping Basics, Concepts, and Principles Explained

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Dropshipping is a great option for an online business opportunity. Dropshipping can be a great online business model for aspiring entrepreneurs. Dropshipping can be started with very little startup capital and some personal equity. After you have achieved success, you can increase your investment in advertising and brand building. Dropshipping is a great way to achieve your entrepreneurial dreams.

Before we move on, let’s make sure you know the answer to the question “What is dropshipping?”

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shopify dropshipping store set up

Dropshipping: What does it mean?

Dropshipping allows online retailers to fulfill their orders directly by purchasing products from third-party suppliers. The products are then sent directly to the customer. The seller does not have to deal with the product directly. Do you sound familiar?

The retail store manager is mostly responsible for shipping and fulfillment. The merchant does not have to order bulk inventory, stock products or fulfill orders physically. The third-party supplier will ship the products on behalf of the merchant.

Dropshipping can be a great option for entrepreneurs as it doesn’t require as much capital to run a store as traditional retail. Dropshipping is a great alternative to traditional retail. You don’t need to open a brick and mortar store, hire staff, keep the lights on, pay overheads, or stock products. Instead, you open an online storefront and buy wholesale from suppliers who already have products and warehouse space.

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What is a Dropshipper?

Dropshipper is a supplier or manufacturer who manages inventory and ships orders to a customer. The merchant is mainly responsible for gaining customers by driving traffic to the store and processing orders, meaning you’ll effectively be a middleman. You’ll still make a lot of money by selling the products you mark up. This is a very simple business model that can yield great rewards.

Dropshipping is a popular option for entrepreneurs because of its low entry barriers and lower cost to launch. This is probably why you are interested in dropshipping. The best part? Dropshipping allows you to build a long-term business from your laptop.

There are many advantages and drawbacks to dropshipping, so it is important that you understand them before you begin your own dropshipping business. Once you understand the pros and cons of dropshipping, however, learning how to do so effectively will be a breeze — especially with the great resources Oberlo provides to aspiring entrepreneurs!

Dropshipping: Benefits

Dropshipping is simple to start

Dropshipping is easy to start. You can quickly start a business if you take the time to understand the basics and then learn more as you go.

Dropshipping is easy to start, especially when compared with other retail business models. For instance, you don’t need a warehouse to store products or a team to help you out. Also, you don’t need to worry about shipping or stocking. You can get started and it’s very hands-free.

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This means you can launch your business right away . You can actually get everything up in a matter of hours.

You need to have some basic knowledge, the right tools and resources. This guide was created because we believe that you should have this foundational knowledge. You’ll have the knowledge and tools you need to launch your dropshipping business once you’ve completed it.

Dropshipping can be scaled

Your business model does not need to change as you grow. While you will need to invest more in marketing and sales as your business grows, your day-today activities will not change except for the processing of more orders.

Dropshipping has the advantage that infrastructure costs are not subject to a huge rise as you scale. This means that you have more money to spend on marketing. You’ll be more successful if you put your efforts into promoting your business, and creating great customer experiences.

Dropshipping does not require an office

A business can be run entirely from your laptop. You don’t even need to invest in expensive equipment. Advertising will be your largest expense. This budget can be scaled as your store grows. Your costs will remain low even as your business expands, especially when you consider traditional business expenses.

Dropshipping can be done in many ways

This is one its greatest benefits. You get to be your own boss and set your own rules. This is a great career choice.

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With a simple laptop and internet access, you can work remotely. You can also work when it is most convenient for your schedule. This is a great option for entrepreneurs who want to build a business that they love. This means you don’t have to be rigid in order to accomplish your goals. Instead, you can set your own pace.

Dropshipping allows you to be flexible and make the right decisions. Dropshipping allows you to list new products at any time you like, and can be adjusted as needed. If you’re going on vacation, you can automate everything to generate passive income while you’re away. The possibilities are endless, you get the idea.

Dropshipping is easier to manage

You don’t have to hire staff or rent warehouse space. This makes it easy to manage everything without too much hassle. Once you’ve found suppliers and set everything up, for the most part, you’re only responsible for managing your online storefront.

The Disadvantages Of Dropshipping

Dropshipping is a low-cost business model

Dropshipping has a disadvantage in that it can lead to low margins at first. Dropshipping can be profitable but it is important to be aware of the possibility that product margins in certain niches may be low.

Dropshipping in highly competitive niches can make this a problem. It can be hard to make the sales you want when you are competing for customers’ attention. However, if you choose the right niche, and target the right audience, you’re far more likely to attain wider margins. You’ll have higher margins in niches that are less competitive, but sales can plateau at some point. Dropshipping is a business that relies on high-quality advertisements to drive sales volumes.

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Dropshipping can make it difficult to process orders

Dropshipping is simple: Your customer orders, you process and your supplier fulfills. It is, for the most part.

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shopify dropshipping store set up

But sourcing products from multiple suppliers can pose problems. You and your customers might have to deal with different shipping solutions from your suppliers. Depending on your shipping setup, the cost of shipping can be prohibitive, especially when shipping multiple products.

Different suppliers may have different billing and processing structures. This can be difficult because you must manage your interactions with suppliers.

Dropshipping isn’t a great way to have a lot more control.

Dropshipping has its disadvantages. You don’t have any control over the order fulfillment process, stocking products, shipping, or ordering. Dropshipping requires you to trust your suppliers to make everything run smoothly and correctly. Although this lack of control can be frustrating for some entrepreneurs, it is usually not a problem.

It is not difficult to manage when things go wrong. While supplier problems can sometimes cause customer retention issues, you can mitigate them and keep customer churn to an absolute minimum with the right damage control.

Dropshipping makes customer service more difficult

Another problem is when suppliers go out of business or orders go wrong. It can be hard to manage customer support and order fulfillment because you are a store owner.

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Dropshipping has one of the biggest drawbacks. Customers complain and you are responsible for the consequences. Dropshipping can be a great business model, but you could still have problems with your suppliers. It’s part of the business model to take responsibility for your suppliers and accept the mistakes.

Dropshipping: Is it for you?

Dropshipping is not for everyone. It can be a rewarding endeavor if you are willing to accept the good and the bad. It’s understandable to have reservations.

  • “I don’t have enough time to start my own business.”
  • “I don’t want to be fired from my job.”
  • What if I invest a lot of money and time into dropshipping and it fails?

When thinking about starting a business, it’s normal to have those reservations but don’t let them stop you. Dropshipping may be an option for you to make more money and have greater freedom.

Dropshipping is Profitable?

Dropshipping can be started in many different ways. Our entrepreneur stories talk about merchants who have started dropshipping businesses to make a few extra hundred bucks a month, while others have grown multiple six-figure stores. Dropshipping is a great way to get started in ecommerce.

Dropshipping as Side Hustle

Dropshipping is a popular business model. Dropshipping is a great side gig because it’s flexible, easy to set up and doesn’t take too much time. Dropshipping is a popular side hustle for entrepreneurs who have steady income and a regular job. You don’t need to give up your job to achieve your entrepreneurial dreams.

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No. 1 worry here is that your employer will prevent you from having a side hustle, but believe it or not, many companies are fine with it. It’s important to check with your employer about their policy regarding side businesses, and any non-compete agreements that you have signed. Also, you want to make sure there is no conflict of interests. If everything is in order, you are good to go.

Dropshipping isn’t something you need to do all the time. You’ll be able dropship without too many hurdles. Are you worried that your side hustle might make it difficult to succeed? It doesn’t have to! Dropshipping is a business that can be run in a few hours every day. You still have the potential to succeed.

It’s essential to be aware of your limits. Dropshipping might not get the attention it deserves if you work overtime and find it difficult to make time for your daily responsibilities. Dropshipping isn’t difficult, but it does require some time.

In most cases, it just takes a little bit of time management and scheduling. Dropshipping can be a great way for retailers to manage both their main and secondary jobs. Dropshipping doesn’t require you to be awake for three hours every night or to skip meals. It’s up to you to create a schedule that works best for you, and to stick to it.

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Dropshipping is a Full-Time Ecommerce Company

Dropshipping offers flexibility. Dropshipping allows you to make your business as large or small as necessary. Dropshippers can choose to work on the side or make it a full-time career. Dropshipping can be your full-time job if you’re interested in becoming a dropshipping retailer.

Once you have reached enough customers and made enough sales, dropshipping can be done part-time or full-time. This is the best part: you can do it at your own pace.

This will require more effort, but it is worth the effort. Dropshipping is easy once you know how to do it effectively. You won’t need to worry about steady revenue. Dropshipping is a well-established ecommerce business that works like a clockwork. It can feel like you are generating passive income.

It’s also easy to do side hustles while working full-time as a dropshipper. There are no limits to what you can do.

Perhaps you are still skeptical about being a dropshipper full-time. There are many success stories of entrepreneurs who started right where you are. You don’t need a business degree or millions of capital to make it a profitable business. Plus, our dropshipping tutorial covers everything you need to get started.

Dropshipping Process

Let’s now discuss what dropshipping actually is. This is a step-by–step guide to dropshipping. It also includes a detailed look at the customer experience (and why it matters).

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The retailer is only one piece of the puzzle, as you can see. Dropshipping success depends on the cooperation of many parties. It can be broken down into 3 basic steps:

The manufacturer creates products and then sells them to wholesalers and suppliers in bulk.

Let’s assume Manufacturer A makes water bottles. The bottles are then sold in bulk to wholesalers and suppliers, who then resell them to retailers.

Wholesalers and suppliers sell the products to retailers.

A retailer such as yourself looks for a supplier to supply a particular type of product. The supplier and retailer then sign an agreement to cooperate.

One thing to note: Although you can purchase directly from the manufacturer of the product, it is often easier to buy from suppliers. Many manufacturers have very strict minimum purchase requirements. You would also need to stock, store, and ship the product.

So, it might seem simpler to buy straight from the manufacturer, but you’ll benefit most from buying from suppliers (and dealing with the slight markup).

Because many suppliers specialize in a particular niche, it is easy to find the products you are looking for.

The products are sold to consumers by Retailers.

Wholesalers and suppliers don’t sell directly to the public. That’s the job of the retailer. The final step between the product’s consumer and its supplier is the retailer.

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Online storefronts are provided by retailers, where consumers can purchase products. The wholesaler will mark up the product and then the retailer will mark it up again to determine the final price. We mean to set a price that is affordable for the item, and makes you a profit.

That’s all! This is the complete dropshipping process, from start to finish. It is a simple but essential concept in business.

We’ll be covering how to open a dropshipping retail company later in this guide. This means that you will learn how to become a merchant who purchases wholesale products to sell to the public. This could be selling via eBay, or on your own website.

Now that you have an idea of what dropshipping looks like, let’s look at what it is like for customers.

Dropshipping, Customer Experiences

Although you have probably purchased products online many times, it is something that you may not have considered. For consumers, it’s second-nature. It’s not something you as a customer should think about, but it is something you must do as a retailer.

The ideal customer experience when ordering from a retail store can be a huge learning opportunity for retailers. Although this may seem obvious, if you have any problems with the customer experience, it can spell trouble for your business. It is important to understand what your customers expect.

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Let’s pretend you have a business called Fancy Water Bottles, a site called FancyWaterBottles.com, and a wholesaler called Water Bottles Worldwide. This is how the customer would view the ordering process:

  1. Customer A places an order for a water bottle on FancyWaterBottles.com and immediately receives an email confirmation of the purchase.
  2. Customer A receives notification that their order shipped after a few hours or up to a few days. Tracking information is included in the notification so that Customer A can track exactly where their package is during transit.
  3. Customer A receives the water bottles.

This is the same process that you have used each time you buy anything online. Although this may seem simple, there are two key aspects to the experience.

It’s very simple. The customer only needs to order the product and make payment. All other information, such as an order confirmation email or tracking information, are handed to the customer on a silver platter.

This brings us to the second point: convenience. It is very easy to shop online. Online purchases take just minutes and customers can shop at any retailer at their convenience. If all goes according to plan, the customer will not even need to interact with anyone. To get the product you want, it takes very little effort.

It’s a lot like purchasing a water bottle in a big-box store and then using the self checkout. This is a simple process that presents no problems and it’s easy to use. This is why so many people shop online. Your storefront should offer the same convenience to your customers.

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Last, but not least: the customer shouldn’t have to find out that other than the retailer is involved. It’s not hard to see the point. It’s easy to think that you can buy anything online and you don’t take into account where the product was purchased or who may be shipping it.

This is how dropshipping should look from the customer’s perspective. Let’s now look at what happens at the other end.

Dropshipping Behind The Scenes

This is what customers see, but what does dropshipping look like behind closed doors? Here is a brief overview of the process.

  1. Customer A places an order for a water bottle on FancyWaterBottles.com and receives an email confirmation of the process. Let’s assume that the total was $14.95.
    Fancy Water Bottles receives both Customer A’s email confirmation and Customer A’s payment via the same email. This is usually made possible by automated software that sends out the confirmation to both buyer and seller.
  2. Fancy Water Bottles will send the order to Water Bottles Worldwide. Water Bottles Worldwide usually receives and processes the order. The purchase will be charged to the retailer.
    Let’s take Water Bottles Worldwide as an example. They charge $12.95 per water bottle. The retailer will pay the same amount and the retailer will earn the difference. The retailer will make a profit of $2.00 in this instance.
  3. Water Bottles Worldwide packages the order. The wholesaler will ship the product. However, Fancy Water Bottles will address the package. Fancy Water Bottles’ name will be on the invoice. This is to ensure that the customer can recognize the name of the retailer on the package. The wholesaler sends the retailer an invoice and tracking details.
  4. The customer receives the shipping information from the retailer. This completes the role of the retailer in the order process.
  5. The customer is presented with the package and receives the water bottle.
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This is dropshipping in action. This is how retailer, wholesaler and manufacturer must all work seamlessly together. It’s easy to do right and results in minimal effort for all involved.

It is important to remember that only two steps are your responsibility as a retailer: shipping information to the customer and ordering to the supplier. Sometimes, you’ll have to be responsible for other things like customer service, but if everything goes smoothly, those two steps are the only ones you have to complete.


Although it may seem like a complex puzzle, once you understand how to dropship, everything becomes easy for everyone. Dropshipping merchants can do it all remotely, and not even touch one product.

Dropshipping is possible without any business experience. While it is helpful, it is not essential. Many budding entrepreneurs believe that they need a MBA or years of experience to pursue their dreams. However, this is not true. Dropshipping offers the advantage of being able to learn as you go.

Better yet, there are numerous resources that make dropshipping easier than ever before. It is possible to have no business experience yet still make a good profit. It will take some time to get the hang of the business and you’ll have to be patient.


This article answers the question, “What is dropshipping?”. It also explains all you need to know about dropshipping before you get started. It’s now your turn to get started in dropshipping.

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Although you may feel small in the beginning due to uncertainty and fear of failure, all successful entrepreneurs started at the same place. Draw up a strategic plan, evaluate opportunities and costs, start yours, and make your business dream happen.