What is dropshipping? And how does it work?
This post was last updated on January 04, 2024.
What is dropshipping, exactly? 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.
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.
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?
Speed and low cost are the primary benefits of dropshipping. You can launch or grow an online store without investing in manufacturing, inventory or warehousing–and once you’ve sourced products, there’s no production lag time. You can start selling immediately.
Even so, dropshipping takes careful planning to execute successfully, especially if you’re learning how to start a business at the same time. Here’s a breakdown of how dropshipping works in seven steps.
01. Choose a product offering
If you’re starting a new dropshipping business, identify a category with a large potential market that also aligns with your passions and expertise. You can use a tool like Google Trends to understand the popularity of certain products or niches over time, or try more specialized market research tools like SaleHoo or Jungle Scout (for selling on Amazon) to find the best dropshipping products. Dropshipping allows you to experiment with product offerings since you don’t have to commit to buying and stocking inventory. Therefore, you could look into selling items that are bulky, fragile or otherwise high maintenance without taking on the risk yourself.
Next, study other sellers in the category you chose and map out the unique brand territory you plan to stake out. Understanding how your competition markets and positions themselves is key to creating your own business strategy. If you already run an online store, consider which complementary categories might be ideal for expansion. Identify price points and product attributes that align with your current offering; for example, if your brand is known for sustainable goods, you’ll need to source suppliers that follow the same standards.
Be inspired: Check out these dropshipping business ideas and dropshipping business names.
02. Find a dropshipping supplier
With your ideal product offering in mind, it’s time to fire up your laptop and begin researching dropshipping suppliers. There are dozens of potential options, so take the time to learn which suppliers have a good reputation for quality products, reliable fulfillment and responsive customer service.
As you research, evaluate the services offered by different types of suppliers and inquire about whether they offer dropshipping. Manufacturers produce goods, while wholesalers and trade companies offer products from multiple manufacturers (they may or may not offer dropshipping services).
By contrast, specialized dropshipping companies are built to handle sourcing, logistics and fulfillment. If you want to offer custom products with your own branding on them, seek out private label dropshipping suppliers or print-on-demand solutions who are willing to work with your specifications.
03. Create a pricing and discount strategy
Once you’ve set pricing with your supplier, run the numbers on how much you need to charge consumers to cover your costs, including fulfillment fees, marketing and customer service overhead. To figure out how to price your products for dropshipping, consider your audience: Are you targeting high-end buyers or bargain hunters? What kind of margin do you need to cover promotions and discounts?
If you’re adding dropshipping to an existing retail business, consider how your new product pricing compares with other categories and how it affects overall profit margin.
04. Set up and populate your online store
If you don’t already have a retail store, the first thing you’ll need to do is set up an eCommerce website. Wix eCommerce makes it easy to create a professional-looking store even if you don’t have advanced knowledge on how to make a website. Its intuitive website builder, complete with AI tools and advanced selling features, makes website creation accessible for anyone. Activate a payment solution such as Wix Payments and you’re ready to sell.
You can manually add products and categories or import information directly from your supplier’s catalog. Don’t just copy and paste the generic product description copy from your supplier; invest time into customizing the content to reflect your unique brand voice. The product features you highlight should reflect your audience’s priorities and call out the best qualities of the product.
In addition, develop proactive customer service content to address common questions surrounding order fulfillment, returns and exchanges. More than half of shoppers say free return shipping is an important factor guiding purchase decisions, while 27% said they sought out flexible return policies, according to a survey from Digital Commerce 360 and Bizrate Insights.
05. Promote your online store
Marketing your products well is what will give you a competitive edge in dropshipping. To attract shoppers to your website and/or alert existing customers to new product offerings, invest in digital marketing. Your exact strategy will depend on your target audience, but in general, these steps are key:
Set up a multichannel strategy: List and advertise products across various platforms for a multichannel approach to sales. This includes Instagram, Facebook, X, Google and others. Don’t depend solely on your website to reach an audience.
Implement SEO best practices: Optimize your website for search engines to improve visibility. Wix’s Semrush integration can help you find relevant keywords to use in your content, while the SEO Assistant can help optimize content across Wix Stores product pages and Wix Blog post pages.
Engage in email marketing: Send newsletters and promotional offers to your subscribers to keep them engaged and up to speed about your latest offerings. Wix’s built-in email marketing tool offers powerful, intuitive features and analytics to help you design, optimize and send your campaigns.
Create quality content: Use blogs, videos and infographics to provide value and draw visitors to your site. Post engaging, high-quality content across your social media channels to build rapport and trust with your audience. Wix’s native AI functionality can help create social post captions for you, giving you multiple options and hashtags to choose from.
06. Process orders and payments
Depending on the technology you and your supplier are using, you may be able to automatically route orders as they arrive. If you’re using a built-in dropshipping solution like Modalyst for Wix, this process is automated.
In some cases, you may need to manually forward the orders to your supplier. In this case, you’ll want to check that all the order details are correct. Your supplier is then responsible for shipping orders directly to customers.
07. Provide seamless customer service
As the public-facing seller, you’re responsible for interacting directly with customers and responding to inquiries. Providing timely and knowledgeable service is all-important for your brand’s reputation and helps foster the trust that leads to repeat business.
Your supplier should provide transparency surrounding order fulfillment so you can quickly access information about shipment status and expected delivery dates. In addition, establish a mechanism for reporting problems with defective or incorrect orders so that you and your supplier are in sync.
How to find good dropshipping suppliers
As you can see, the relationship between seller and supplier is all-important for dropshipping success. Investing time and effort up front to find trustworthy partners can prevent customer service headaches later on. To identify the right supplier for you, follow these tips:
Do your research: Look for suppliers with experience in your product category. If you have products from specific manufacturers in mind already, contact those companies directly and ask if they dropship. If they don’t, ask which dropshipping companies they work with. Trade shows and word-of-mouth referrals can also uncover leads. Join online forums such as the r/dropshipping community on Reddit for networking and ideas. Additionally, check out top dropshipping companies, including Chinese giant AliExpress and New Zealand’s SaleHoo. In the U.S., Worldwide Brands is a well-established dropshipping resource. Wix-owned Modalyst offers a combination of print-on-demand and dropshipping services as well as access to a supplier network.
Check reviews and references: Once you have a list of suppliers in mind, read reviews from other clients and contact them directly, if possible. Don’t be shy when it comes to asking questions and speak to as many people as possible to get the best idea of what the supplier is capable of. Once you’re in direct contact with a supplier, request references from satisfied customers; if you don’t receive any, that’s a red flag.
Contact the supplier: Contact candidates directly to ask questions and get more information. In addition to requesting references, ask for details about how orders are processed and fulfilled, and what kinds of communication channels are available to you as a retail partner.
Request samples: To ascertain the quality of goods and to see how they’re packaged, ask potential suppliers to ship you an assortment of items you’re considering. In addition, consider playing “mystery shopper” and placing orders with your candidates’ other dropshipping partners to see how well the process works from the customer's point of view.
Start small: As a first-time dropshipper, establish relationships with three to five suppliers at most. Once you have a better understanding of the process, the customer service needs and the marketing costs, you can expand your range of products from existing suppliers or add new ones.
Benefits of dropshipping
Dropshipping is an attractive model for a variety of reasons. Benefits 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.
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.
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 limitations and risks
Despite being flexible and offering low barriers to entry, dropshipping has potential drawbacks. If you’re considering launching a business built on dropshipping, 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 a comprehensive marketing strategy.
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.
Is dropshipping right for you?
To navigate the complexities of how to start a dropshipping business, you’ll need the right combination of savvy, persistence and favorable market conditions. Ask yourself questions about the following things:
Your skills and experience: Do you have experience in eCommerce or marketing? If not, dropshipping can be a steep learning curve.
Your resources: Do you have the time and money to invest in a dropshipping business? Dropshipping can be a profitable business model, but it takes time and effort to build a successful business.
Your niche: What products or services do you want to sell? Dropshipping is a good option for businesses that sell low-cost, high-margin products.
Your competition: How much competition is there in the dropshipping market for the products you want to sell? If there's a lot of competition, you'll need to find a way to differentiate your business.
Your risk tolerance: Dropshipping is a low-cost business model, but there are still risks involved, such as shipping delays and customer service issues.
If you're considering dropshipping, it's important to do your research and understand the risks involved. If you're willing to put in the work, dropshipping can be a profitable business model.
See it in action: 3 dropshipping examples
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. Sell dropship-only items
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. Enhance your store’s existing inventory with dropshipping
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. Add a secondary revenue stream by selling print-on-demand merch
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.
The keys to dropshipping success: 6 quick tips
If dropshipping is a fit for your business and your expertise, then you’re ready to dive in. As you start the process, consider these best practices.
01. Stake out your niche
Within your industry category, take the time to understand what dropshipping product trends and what potential competitors are doing. Focusing on a specialty product or selecting products based on a well-defined aesthetic, style or theme will help set your brand apart. If the market is saturated or the margins are very low for the products you have in mind, reconsider your strategy; you want to start with a unique claim to fame that will appeal to your target audience.
02. Be transparent with customers
Disclose that you work with outside suppliers in your customer service content and shipping information, and set expectations up front for delivery timeframes. Ensure your shipping information and policies for returns and exchanges are prominent from the product page onward through the shopping cart and checkout.
03. Provide in-person help
Whether via online chat, social media messaging or a call center, offer an option for customers to reach you live. Not only can conversational interactions get to the bottom of questions quickly, but they’re also an opportunity to showcase your staff’s expertise and helpfulness. You don’t have to offer 24/7 access; just state your hours clearly and use auto-responders when closed to let shoppers know when they can expect a response.
04. Choose the right platform
With so many eCommerce platforms on the market, it's important to choose one that offers the features and support you need to grow your business. Look for a platform like Wix eCommerce with built-in dropshipping features, including automatic inventory updates and order management tools.
05. Invest in full-cycle marketing
While engaging new audiences is crucial at launch, follow up with marketing initiatives for every stage of the customer lifecycle. Shoppers in mid-research mode who’ve visited your site without buying can be lured back via retargeting ads and reminder emails about items left behind in the shopping cart. Once shoppers have placed an order, begin the loyalty journey with engaging content, periodic promotions and a loyalty program that awards perks and exclusives.
06. Be patient and flexible
Once your dropshipping business launches, monitor results closely using digital analytics tools like the Wix Stores report. As your understanding grows of audience behaviors and purchasing patterns, adjust your website and product offerings to reflect buyers’ preferences. Expect a learning curve and remember quick success is rare.
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. These emerging categories represent a ripe opportunity and might be a starting point for researching which products to offer.
How to start dropshipping with Wix eCommerce
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 build your website, connect to dropshipping suppliers and manage products and orders from a single administration interface. The steps to get started are simple:
Design your website: Use Wix’s website builder to create an eCommerce site 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: 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 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 payment 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.
Watch our free video courses to learn more about eCommerce today!
What is dropshipping? FAQ
Yes, dropshipping is completely legal. To be clear, you’re selling products with the suppliers’ permission. Make sure to run honest marketing campaigns and comply with online sales tax laws.
Is dropshipping good for beginners?
How do dropshippers make a profit?
How much does dropshipping cost?
How big is the dropshipping market?
Is dropshipping easy money?
What’s the difference between dropshipping and retail arbitrage?
Other dropshipping ideas and products to consider
Allison Lee Editor, Wix eCommerce
Allison is the editor for the Wix eCommerce blog, with several years of experience reporting on eCommerce news, strategies, and founder stories.
Geraldine Feehily
Marketing Writer, Wix eCommerce
Geraldine is a marketing writer for Wix eCommerce. She uses her broad experience in journalism, publishing, public relations and marketing to create compelling content and loves hearing user success stories.
