1. Definition

Dropshipping is an e-commerce business model where retailers sell products without holding inventory. Instead, the products are shipped directly from the supplier or manufacturer to the customer. The retailer acts as an intermediary, focusing on marketing and sales while the supplier handles storage and logistics. This model enables low startup costs since no significant investment in stock is required.

2. Scope

Dropshipping is widely used in online retail and is suitable for businesses of various scales. Common applications include:

• Startups: Dropshipping offers new businesses a cost-effective way to test products without high risks.
• Niche Markets: Retailers can focus on specialized product categories without investing in extensive inventory.
• Business Scaling: Established businesses use dropshipping to expand their product range without incurring additional storage costs.
• Global Markets: Dropshipping allows retailers to offer products in multiple countries without maintaining local warehouses.

This model is particularly appealing to solo entrepreneurs as it provides a flexible and scalable business structure. However, selecting reliable suppliers is crucial, as the retailer is ultimately responsible for customer satisfaction.

3. Types of Dropshipping

Different variations of dropshipping exist, tailored to various business models and target audiences:

• Standard Dropshipping: The retailer sells products shipped directly from the supplier or wholesaler.
• Print-on-Demand: Products such as apparel or mugs are custom-designed for customers and only produced and shipped after an order is placed.
• Private Label Dropshipping: The retailer has products manufactured under their own brand (private label) and shipped directly by the supplier.
• Hybrid Model: A combination of dropshipping and inventory management, where the retailer stocks some products while using dropshipping for others.

While dropshipping offers advantages like low financial risk and flexibility, it also poses challenges such as low profit margins, supply chain issues, and intense competition.