What Is Dropshipping and How Does It Work? (2025)

Dropshipping is a way of running an online business where you sell products without holding any inventory — instead, the supplier ships orders straight to your customers.

Dropshipping is one of the easiest and most popular ways to launch an online business. It eliminates the usual hassles of retail—like stocking products, managing inventory, or handling shipping.

Instead, when a customer places an order, the store simply passes the order to a third-party supplier, who ships the product directly to the buyer. This hands-off approach allows business owners to spend more time on what really matters: marketing, building a brand, and growing their customer base.

In this guide, you'll discover what dropshipping is all about, how it actually works, and how you can start your own dropshipping store today.

What Is Dropshipping? (In Simple Words)

Dropshipping is a way to sell products online without storing them yourself. When someone buys from your store, you send the order to a supplier — they handle packing and shipping directly to the customer.

It’s a low-cost, beginner-friendly business model because you don’t need to pay for warehouses or worry about leftover stock. However, you give up some control over the customer experience, like shipping speed or packaging.

Despite that, dropshipping is huge — it brings in over $370 billion in global online sales each year.

What Are Dropshipping Suppliers? (Explained Simply)

Dropshipping suppliers are the people or companies that handle the behind-the-scenes work after a customer places an order. They take care of storing the products, packing them, and shipping them straight to your customer — so you don’t have to.

You can work directly with a single supplier or use platforms like AliExpress, which connect you with many suppliers in one place. Some manufacturers, wholesalers, or small makers also offer dropshipping services to help you run your business more easily.

What Is a Seller of Record? (In Simple Terms)

A seller of record is the business or person officially selling a product to the customer. They set the price, collect payments (including taxes), and make sure everything follows local laws.

In dropshipping, you (the store owner) are usually the seller of record. That means your name and info show up on the receipt or package — not the supplier’s. You're also the one customers contact if there’s a problem, like returns or refunds.

For example:

If someone buys a cat collar from your online store, you send that order to your dropshipping supplier. The supplier ships it out — but they include your store’s name and contact info, so the customer sees you as the official seller.

How Dropshipping Works: Step-by-Step Guide

1. Find a Dropshipping Supplier

Start by choosing a supplier who sells the types of products you want in your store. Once you make a deal, they’ll take care of storing, packing, and shipping the products when someone places an order.

You can work with a niche supplier or use a dropshipping app that connects you with many suppliers at once.

2. Build Your Online Store

Next, create your online shop where you’ll list the products and set your own prices.To automate things, install a dropshipping app that updates your product listings and sends orders straight to suppliers.

Here are a few popular apps:

1. Collective: Sell from other Shopify brands.
2. DropCommerce: Connect with 400+ North American suppliers (fast 3–5 day shipping).
3. Syncee: Access over 12,000 brands globally — great for selling in Europe.
4. Printful: Sell custom products (print-on-demand, no inventory needed).
5. DSers: Link your Shopify store with AliExpress suppliers.

3. Get a Customer Order

When a shopper buys something from your store, they check out as usual. They pay you directly and get an order confirmation.

4. Send the Order to the Supplier

Once you receive the payment, you forward the order to your supplier. If you’re using an app, this step is usually done automatically.

5. Supplier Packs and Ships the Product

Your supplier prepares the product and ships it straight to your customer. Many offer custom packaging and branded invoices with your business name.

6. Customer Gets Their Order

The customer receives their order — shipped by the supplier, but it looks like it came from your store. You stay in charge of any customer service questions or returns.

Is Dropshipping Right for You?

Wondering if dropshipping is the right move? Here are a few signs it might be a good match for your skills and goals:

You’re a natural at marketing

If you’re good at getting attention online — whether through SEO, TikTok, YouTube, Instagram, or Google Ads — dropshipping could be your sweet spot.

Why? Because the main job of a dropshipper is to attract people to your store. Successful dropshippers know how to create content, use social media, and understand how search algorithms work to turn browsers into buyers.

Still unsure if dropshipping is the right business model? Here’s how to know if it matches your goals and working style:

You focus on sales, not branding

If your main goal is to make as many sales as possible rather than building a long-term brand, dropshipping might be ideal.

Unlike other business models where you create custom packaging and brand identity, dropshipping offers limited control over branding. Products are often generic, and packaging is handled by the supplier — making it harder to stand out or build customer loyalty.

Want a branded experience? You could look into private label or print-on-demand dropshipping for more personalization.

You want to offer a wide range of products

Dropshipping gives you the freedom to sell a large variety of items from suppliers all over the world — without buying or storing inventory.

But keep in mind: this means less control over product quality and consistency. You can test samples, but you usually don’t control how the products are made.

You’re okay with slower shipping

Dropshipping often involves working with international suppliers, especially from places like China. That means shipping can take longer — sometimes weeks — unless you're using local suppliers.

If you're able to find domestic partners or set realistic delivery expectations with your customers, slower shipping won’t hurt your business.

You’re ready to handle customer service

Even though you’re not packing or shipping items yourself, you’re still the face of the store. That means you’ll be the one handling any complaints, refunds, or questions — even if the issue was the supplier’s fault.

If you're prepared to handle customer concerns with patience and professionalism, you’re on the right track.

You’re ready to scale

Dropshipping isn’t just for beginners — it can help established businesses grow too. You can use it to test new products or expand your catalog without investing in stock upfront.

This allows you to offer more variety, boost your average order value, and reach new customer groups.

7 Reasons Why Dropshipping Is So Popular

Wondering why so many entrepreneurs choose dropshipping? Here are seven major benefits that make it a go-to ecommerce model:

1. Low Startup Costs

You don’t need to buy inventory upfront, rent a warehouse, or hire staff. Many dropshipping businesses are started from home using just a laptop.

Less money needed to get started — but you’ll need to invest time and strategy to stand out in a competitive market.

2. Huge Product Variety

You can sell almost anything — from trending gadgets to fashion or home goods.

Since you’re not buying in bulk, it’s easy to add or remove products anytime. If your supplier stocks something new, you can start selling it right away.

3. No Product Development Needed

Forget about designing or building your own products. With dropshipping, you can choose ready-made bestsellers that already have proven demand.

4. Work from Anywhere

Dropshipping gives you location freedom. As long as you’ve got internet access and can reply to customers and suppliers, you can run your business from anywhere — at home, while traveling, or in a café.

5. Easy to Launch

You skip a lot of the headaches that come with traditional retail. No need to:

1. Rent storage space
2. Track stock levels
3. Pack or ship products
4. Handle returns manually
5. This makes it easier for beginners to start selling online.

6. Great for Testing

Want to try a new product idea? With dropshipping, there’s little risk. You can test products in your store to see what sells — no need to commit money to inventory upfront.

7. Scales Easily

As orders grow, you don’t need to worry about shipping logistics — your suppliers handle that. You can focus on marketing and growing your brand without being tied down by fulfillment.

Dropshipping disadvantages

Like any retail approach, dropshipping has some challenges. Here are three key drawbacks to keep in mind:

1. Slimmer profit margins
2. Unstable inventory availability
3. Complicated shipping processes

1. Slimmer profit margins

Because dropshipping is easy to start, competition can be fierce. This often forces sellers to lower their prices, which shrinks profit margins. When prices get too low, it’s harder to maintain a healthy profit for your business.

You can reduce this issue by carefully choosing your products and focusing on a niche market that isn’t overcrowded.

2. Unpredictable inventory availability

Although dropshipping helps with managing stock, it also means you’re vulnerable to sudden changes in what products are actually available. Since suppliers serve many sellers at once, their stock levels can change quickly—something less common if you hold your own inventory.

Luckily, many dropshipping tools offer ways to handle this, like automatically hiding items that are out of stock or marking them as “Sold Out” to keep customers informed.

3. Complicated shipping logistics

When working with multiple suppliers, fulfilling orders gets more complex. For example, if a customer buys three products from three different suppliers, you have to figure out separate shipping fees and taxes for each, and customers might receive their items at different times.

If you’re dropshipping internationally, shipping gets even trickier due to customs, tariffs, and import duties. Resolving these issues can be a hassle if something goes wrong.

One way to manage this is by passing shipping costs and taxes on to customers, but that could make your prices less attractive.

It’s important for dropshippers dealing with global suppliers to understand tariffs and Harmonized System (HS) codes—these codes determine what import duties apply to your products. Incorrect classifications can cause unexpected fees, customs delays, and unhappy buyers. Tools like the Tariff Guide can help you find the right HS codes and tariff rates, especially for shipping into the U.S.

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