- Allison Ko
- 2 days ago
- 12 min read
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Dropshipping is a popular way to sell online without stocking and shipping goods. That means no inventory, no warehousing costs, no packaging, no last-minute delivery headaches—essentially, you can outsource everything that happens after a shopper makes a purchase.
Dropshipping represents a special type of freedom in the eCommerce space. But as the saying goes, with great freedom comes great responsibility. To successfully launch a dropshipping business, you need to conduct research, build a fully functioning eCommerce website and support your online store with a solid marketing and customer service strategy.
This comprehensive guide will explore the benefits and complexities of dropshipping and outline everything you need to know before getting started with starting a business.
Ready to start selling? Try Wix’s dropshipping website builder today.
What is dropshipping?
Dropshipping is a type of retail fulfillment business that outsources production, warehousing and shipping to a third-party supplier. If you dropship some or all of your products, you don’t stock or fulfill those items yourself. Instead, when you receive customer orders, you route them directly to manufacturers or wholesalers for direct shipment to customers. You don’t pay for the items until they are purchased by your customers.
This arrangement can be a win-win for everyone involved. Sellers get to focus on curating and promoting items as opposed to managing inventory and warehouses; suppliers get to focus on making and delivering goods without needing a retail operation; and shoppers gain access to products they can’t necessarily find at their local stores.
Dropshipping can be a quick way to start a business, with minimal upfront costs and low risk.
Learn more: eCommerce vs dropshipping
What is a dropshipper?
A dropshipper is an intermediary between consumers and suppliers, curating and promoting the goods that suppliers ship to customers. Retail businesses can operate exclusively as dropshippers, or they can stock some products themselves and dropship others.
Dropshipping is booming thanks to the rise of eCommerce, but sellers in any channel can be dropshippers. In the 20th century, catalog brands such as JCPenney and Sears used a form of dropshipping when routing mail orders directly to manufacturers for faster delivery. Today, retailers with limited physical floor space or pop-up sellers can display samples and fulfill orders using dropshipping.
Whatever type of business that dropshippers choose to start, this niche is growing. The global dropshipping market is projected to jump more than 30% through 2027, according to data by Research and Markets.
How does dropshipping work?
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn't stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.
Here's a simplified step-by-step overview of how it works:
01. The retailer sets up an online store
The process begins with you, the retailer. You create an online store and select products to sell typically from a dropshipping supplier or marketplace. Your store showcases these products with pricing and descriptions. When a customer visits your store, they see one cohesive brand – they don’t interact with the supplier directly.
Your main responsibility in this step is marketing the products, optimizing your store and setting retail prices that allow for profit while remaining competitive.
02. The customer places an order
A customer browses your online store, selects a product and makes a purchase. They pay the retail price you’ve set for the item. At this point, you don’t need to worry about managing inventory or packaging – the order details are seamlessly passed on to the next stage.
It’s critical to have an easy-to-navigate storefront and a secure payment system so the buying process is smooth and builds trust with customers.
03. The retailer sends the order to the supplier
Once the customer has completed their purchase, you forward the order details to your dropshipping supplier along with payment for the product at its wholesale price. Many dropshipping platforms automate this process, making it efficient and error-free.
The wholesale price is lower than what the customer paid and the difference between the two amounts becomes your profit after deducting any other fees or expenses.
04. The supplier processes the order
At this stage, the supplier takes over. They pick, package and prepare the product for shipping. This eliminates the need for you to deal with physical inventory or logistics, freeing up your time to focus on other aspects of your business like customer support and marketing.
Reliable suppliers ensure the correct product is packaged and meets the quality standard you’ve promised.
05. The supplier ships the product
The supplier ships the product directly to your customer using the address details provided. The process is seamless from the customer’s perspective – your online store remains the face of the transaction. Packaging often includes neutral branding so customers may not realize a third party handled their purchase.
It’s essential to work with reputable suppliers to ensure timely delivery and positive customer experiences.
06. The customer receives their product
Once the shipment arrives, the customer receives exactly what they ordered. While the supplier manages logistics you remain the point of contact if the customer has questions or concerns about their order. Providing excellent customer service at this stage can strengthen your brand and encourage repeat business.
Benefits of dropshipping
Dropshipping is an attractive retail model for a variety of reasons. Some of the main benefits of this type of business idea include:
Low startup costs
If you use dropshipping and free or low-cost eCommerce site tools to launch an online store, your cash outlay is minimal. You don’t need to pre-purchase inventory and your suppliers typically absorb the cost of storing and shipping products (though in some cases, may charge you for shipping).
No warehousing
Since suppliers hold inventory, you don’t need to lease storage space or fill your garage. You also avoid warehouse labor costs, which have risen an average of 8% since 2020, according to the Wall Street Journal.
Expansive product selection
Since you're not limited by physical storage space or geography, you can sell as many products as you want. In addition, the selection of products available to you is nearly unlimited, giving you the freedom to curate a unique assortment. If items don’t sell well, you can pull back quickly without needing to offload residual inventory. Broad product options mean you can appeal to a wider potential customer base and even bundle products together to sell more.
Operate from anywhere
In the past, retailers were tethered to physical store locations. Now, if you operate an online-only dropshipping business, you can manage your eCommerce site from anywhere with internet access. This gives you flexibility as a business owner in terms of where you work from but also in relation to what you sell. If you're not tired down by inventory and needing the space to store it, you can sell anything from anywhere and even pivot if an item doesn't sell well, to something else.
Automated workflows
Once your store is up and running, much of the day-to-day order management can be automated. While you still need to monitor customer service and marketing promotions carefully, the mechanics of purchases, fulfillment and shipments can run in the background. Merchants using Wix’s dropshipping solution can automate inventory management, order routing, order tracking and more.
Scale efficiently
The combination of automation and supplier outsourcing means you can grow your business quickly with fewer staff members and logistical headaches.
Dropshipping drawbacks and limitations
Despite being flexible and offering low barriers to entry, dropshipping has potential drawbacks. If you’re considering launching a business built on a dropshipping business idea, be aware of these caveats:
Stiff competition
Because dropshipping offers so many potential benefits, millions of other sellers are trying their hand at it. And unless you lock in an exclusive contract with a supplier, there’s nothing to prevent them from dropshipping for a competitor. To stand out, you need a strong brand differentiator, top-notch customer service and comprehensive marketing strategies.
Low profit margins
Because there are so many potential suppliers, including ones from overseas, many dropshippers stake their brands on rock-bottom pricing, which can make it tough to eke out a profit or to compete with higher price points. While high-ticket dropshipping can be successful, you’ll need to cover additional fulfillment fees for upscale packaging and insurance, and customers will expect concierge-style customer service, which can also be costly.
Lack of quality control
Since you're not physically handling the products yourself, you don’t know whether suppliers are delivering quality goods or cutting corners, or whether they’re offering counterfeit merchandise. The challenge is especially steep if you source products from overseas suppliers, where safety standards may not match local regulations and quality may not be up to par. A growing number of stories are circulating about customers feeling duped after receiving products that don’t match the online descriptions. But as the seller of record, your brand is on the line.
Sustainability and social concerns
Half of consumers would be willing to pay a premium of up to 10% for ethically and sustainably made products, according to PwC. But it’s hard to vouch for products and manufacturing processes you haven’t evaluated in person, which puts you at risk for accusations of “greenwashing.”
Customer service accountability
If customers have problems with order delivery or the products themselves, it’s up to you to resolve the issues, even though you didn’t make the items or ship the packages. Tight cooperation with your dropshipping partners and responsive communication on their part is essential. When vetting potential suppliers, quiz references extensively to ensure you’ll be able to meet customers’ expectations.
Lack of recourse
Before signing a contract, review the terms and conditions with an attorney. If your dropshipping partner is overseas, work with a legal firm that has experience on the ground there. Otherwise, you may have few options if the relationship sours or, worse, defective or damaged products cause a customer harm.
How to start dropshipping with Wix
Now that you know everything there is to know about dropshipping, you’re ready to take the plunge—and there’s no easier way to get started than to use Wix eCommerce. With Wix’s end-to-end platform, you can quickly learn how to build a website, connect to dropshipping suppliers and manage products and orders from a single administration interface. The steps to get started are simple:
Come up with your dropshipping idea: Identify a niche by researching trending products and analyzing market demand. Look for gaps in the market, research competitor offerings and check social media trends. Use tools like Google Trends and Amazon Best Sellers to validate your ideas and ensure profitability and low competition.
Design your website: Use Wix’s website builder to create an eCommerce site or online store with the right tools for dropshipping automatically built in. No coding is required; Wix’s interactive platform will walk you through the process and give you a range of online store templates to choose from, as well as the ability to customize everything to your preferences. Additionally, built-in AI tools can automatically generate text for product descriptions, FAQ pages, email newsletters, social posts and more.
Connect to the Modalyst dropshipping hub or choose another dropshipping supplier: Wix’s Modalyst marketplace connects you with thousands of vetted dropshipping suppliers who deliver high-quality products and reliably fulfill orders. You can browse items by categories, including name brands, trending items and independent labels.
Choose dropshipping products: Select your product assortment and import the items to your Wix site. Customize the product pages, including the product descriptions, to be unique, engaging and reflect your brand voice. Add lifestyle images to supplement or replace the standard catalog photos. Pricing and inventory are automatically updated to reflect the suppliers’ latest information and displayed on your pages.
Set your product costs: Establish a baseline price markup formula based on your suppliers’ prices so you can see how much you’ll earn on each product before launching it for sale. As mentioned earlier, remember to factor in your costs, including overhead for fulfillment fees, marketing and customer service. Many suppliers handle the shipping costs directly; if yours does not, you’ll want to factor that in, as well.
Get ready to transact: Set up Wix Payments to transact orders and accept payments online via credit and debit cards, digital wallets and “buy now, pay later” solutions.
Monitor orders: Once launched, you can review and track orders via the Wix dashboard. Follow up with suppliers to ensure they’re fulfilling orders, and obtain tracking numbers so you can monitor estimated delivery dates.
Market effectively: Use Wix’s marketing tools to get the word out and build your brand presence. Social media is a great way to connect with potential customers—use it to showcase your products and build a loyal following. Make sure your site is optimized for SEO by adding relevant keywords to product descriptions and blog posts to improve search rankings. Wix email campaigns and analytics can help you reach the right audience and fine-tune your strategies, so you’re always making the most of your marketing efforts.
Learn more: Best dropshipping website builders
Dropshipping examples to inspire your business
Ultimately, there are many ways in which you can use dropshipping to build or enhance your eCommerce business. Below are three examples of ways that you can leverage dropshipping.
01. The Boho Birdy
Australian company and Wix merchant The Boho Birdy offers affordable “boho”-style apparel, bridalwear and homewares. Dropshipping is baked into the brand’s identity as a low-cost shopping source, and the selection is carefully curated to highlight eclectic finds that align with their aesthetic. Flowy apparel, paisley prints and natural fabrics dominate, and the site offers retro band T-shirts from the 1960s and 70s.
The unique selection is backed by an extensive FAQ, multiple payment options and easy access to customer service via live chat—proactively addressing shoppers’ questions and easing purchases.
02. Sweet Mana
If you already run an eCommerce business and want to add more items to inventory, but lack the time or budget to source and stock them yourself, you can use dropshipping to complement your existing product mix.
Sweet Mana is a skincare and lifestyle company with a wide range of products. The company's ethos is centered on relaxation, mindfulness and healing the spirit; the intent is to inspire “a state of island bliss.” The core offering is Sweet Mana’s branded line of handcrafted botanical skincare products and candles. To extend the site’s product offering, Sweet Mana uses dropshipping to offer travel photography prints with a meditative subject matter that aligns with the brand. Curated selections of crystal jewelry, virtual feng shui kits and beach-ready bikinis and sun hats round out the assortment.
03. Little Tail Farms
You don’t need to be a retailer of physical goods to take advantage of dropshipping. Whether you sell software subscriptions or work in the community as a charity or school, you’ve likely got fans who appreciate clever merchandise tie-ins. With branded merchandise created via print on demand, you can supplement your primary revenue stream and provide fun options to your existing customer base.
The owners of Little Tail Farms raise adorable dwarf goats, babydoll sheep and other unique breeds of farm animals. The company’s primary source of income is agritourism—visitors who stay overnight or take two-hour tours to meet the animals. The Little Tail Farms Store provides additional income via print-on-demand logo T-shirts and accessories that serve as mementos of customers’ visits.
What is dropshipping FAQ
Is dropshipping worth it?
Given the resources and effort involved, it’s reasonable to ask: Is dropshipping worth it?
In response, consider the potential market. Revenue from retail eCommerce in the U.S. is projected to grow 51% from 2023 to 2027, according to Insider Intelligence. What’s more, spending is forecast to grow in categories that have so far been underserved online. While apparel, furniture and electronics will still claim a significant share of eCommerce dollars, health and personal care products, and food and beverage items, are each forecast to account for at least 10% of eCommerce sales by 2027.