Dropshipping in 2022: What is dropshipping and how does it work?
This guide covers the definition of dropshipping, pros and cons, and alternatives to consider for ecommerce businesses
Introduction to dropshipping
Dropshipping is an order fulfillment option that allows ecommerce businesses to outsource procuring, storing, and shipping products to a third party. This order fulfillment method appeals to entrepreneurs seeking low overhead and low capital investments, but it can come at a cost.
Ecommerce is competitive. Dropshipping may appeal to entrepreneurs looking to sell generic products, but it can limit opportunities to build a brand or differentiate products. Thus, businesses that use dropshipping may wind up competing on price, leading to low margins.
If you are considering dropshipping for your ecommerce business, there are several factors you should review—including some variations and alternatives that offer similar benefits.
What is dropshipping?
Dropshipping allows you, the seller, to outsource the fulfillment process to a third party, typically a supplier. The manufacturer or third-party supplier handles the production, storage, shipping, and delivery of products to the customer.
This business model appeals to some ecommerce sellers because it can decrease overhead and operating costs. In some dropshipping agreements, you handle marketing and customer service, while the dropshipping service manages the physical goods and fulfillment.