Dropshipping is a business model where you do not keep the products you sell in stock. Instead, you directly receive an order from your customer and then arrange for the goods to be shipped from the supplier to your customer. You are only responsible for advertising, marketing and customer service; all other aspects of the sale remain between buyer and seller.
Keep in mind that this is just one business model. Dropshippers can also have their own warehouses or other storage facilities, depending on which works best with their business' structure, size, location and target market.
It's very important to note that dropshipping is different than a consignment operation, which means drop shipping isn't really considered "fulfillment" at all! (In fact, some dropshippers have a negative opinion of companies that refer to themselves as "fulfillment houses" because they believe these companies are trotting out the term "dropship" and trying to take advantage of misconceptions people may have about the term.)
A true dropshipping business would never handle or store any product. This usually means your business is just an intermediary between customers and suppliers without holding inventory.
The one exception to this is if you're actually legally required by law not to ship products directly from the supplier (in which case you would need inventory for that purpose). Instead, you'd ship directly from China/wherever the manufacturer is located. Either way, however, there's no worry about returns or refunds, because you are not responsible for anything that happens between buyer and seller.
The benefits of dropshipping:
1. Quick startup time (usually) : Unlike most e-commerce businesses that require you to invest in stock or products before you have a sale, there's no need for upfront capital if your model is dropshipping. Some suppliers will even give free samples so you can test the waters without having to make an initial purchase. The supply chain operates with these types of companies as well, since they're not handling returns or exchanges anyway -- they just ship directly to the customer based on what's been ordered online.
2. No inventory management: You don't have to worry about purchasing, managing and storing products in your own warehouse. As long as you have a computer and an internet connection, you can run your business from anywhere in the world!
3. No storage required: This is another advantage of dropshipping -- there's no need to rent, lease or buy expensive facilities for storage! Since all products are handled by someone else, all you really need to invest in is office space to manage sales and marketing (or even just use your existing home office).
4. Simple logistics: Once you get going, handling orders for dropship suppliers should be fairly easy because they tend to operate on very simple order systems that most people will be able to navigate with relative ease. All you'll need to do is forward the customer's purchase information onto the supplier, and they'll do the rest.
5. Low overhead: You don't need much startup capital to get started with dropshipping, which means you can get your business running relatively quickly, even if you only have a small amount of money currently available for investment. This also helps keep overhead very low as well -- no expensive storage facilities or extra employees are required!
6. Low risk business model: Since products aren't handled by the company once an order is placed, merchants never carry risk on unsold inventory. If something happens to the item while in transit (such as it getting lost or stolen), it's not your problem; someone else is responsible for that outcome and will simply ship another one out at their own expense.
7. Easy to scale: Since you don't have to worry about inventory, drop shipping is a model that's easy for anyone to replicate and grow over time.
8. Efficient use of space: You can operate from pretty much anywhere in the world, provided you have an internet connection! All you need are basic office supplies like pens, paper and computer equipment to get going. This means it only costs money when you're generating sales -- not when your business isn't operating at full capacity.
9. No need to hire employees: Since there are no physical products that need handling, a dropship business can be operated entirely by the owner with minimal outside help. In fact, some of the most successful drop shipping companies in the world have just one or two people working full-time!
No matter what business you're considering starting, one thing is for sure -- there will be challenges along the way . Sometimes it may even seem as though someone is attempting to do you harm. However, none of these things will ever deter any entrepreneur from achieving their dream if they truly believe in themselves enough and know how to overcome any obstacle thrown their way. You've got this!"