What is Dropshipping? (2024)

What is dropshipping? And should you use it as a business model? In this guide we answer these questions, discuss all the pros and cons of dropshipping, and give you a cheatsheet for starting a dropshipping business.

There are two ways to use this resource: you can either watch our video guide to dropshipping, below, or you can read the whole post, which contains more detail on how to get started with it. For best results, we recommend doing both!

Let’s start with a simple definition:

What are the advantages of dropshipping?

Dropshipping is a fast-growing industry, which in 2024 is thought to be in the region of $300bn in value (with forecasts estimating that its value could grow to as much as $476bn by 2026).

There are several advantages of dropshipping that have led to this explosion in popularity.

1. Dropshipping doesn’t require much startup capital

The main advantage of dropshipping is that you don’t need much in the way of capital to start doing it. When you dropship, you become a ‘middle man’: you mark up on products that you never buy, stock or deliver. Because you don’t have to spend a lot of money on inventory that you might never successfully sell, dropshipping is ultimately a low-cost, low-risk way to start a business.

2. The ongoing running costs are very low

In addition to providing a low-cost way to start a business, dropshipping also lets you run a business cheaply. It doesn’t require you to pay for storage space or staff; you can technically run the business by yourself using just a laptop and some fairly cheap software.

You will need a budget for advertising your store online — but how much you spend on this is up to you (online advertising platforms generally let you spend as little or as much as you like on ads, and give you tools to see which ones are generating a return on investment).

3. You can sell a wide range of products

With dropshipping, there are no limits placed on what you can sell online. A huge number of dropshipping suppliers are available to supply you with a huge number of products — meaning that you have a lot of flexibility regarding the niche you want to dropship in, and a lot of different sales opportunities for your online store.

By contrast, if you’re manufacturing your own products, or sourcing them through more conventional means, you may find it harder to operate in certain niches, give your customers as wide a range of products to choose from, or create upselling opportunities.

4. You can run your business from anywhere

A dropshipping business doesn’t tie you down: so long as you have an Internet connection and a computer, you can run it from anywhere.

5. It’s not labour intensive

Unlike a business that involves selling your own products (or stocking somebody else’s), dropshipping is not labour intensive. You don’t need to worry about sourcing warehouse space; packaging goods; shipping products; dealing with product returns; or inventory management.

You will have to deal with customer enquiries, but overall, the workload involved with dropshipping is significantly smaller than many other online businesses.

6. It’s easy to scale

In order to scale certain types of online businesses, you need to invest heavily in staff, systems and inventory — and sometimes change your operations in very radical ways to ensure continued growth.

This is not really the case with dropshipping — aside from investing in marketing, you don’t need to spend much or change much to grow this type of ecommerce business. Most of a dropshipping business’ infrastructure can more or less stay as is — it’s just a case of putting more orders through it.

7. It’s easy to experiment with

Because setting up a dropshipping business is relatively risk-free, you get a lot of freedom to experiment and try things out. Changing your online store’s branding, product ranges and online advertising techniques doesn’t really involve much (if any) expenditure.

And, because dropshipping is for the most part a digital business, you can get a lot of easy-to-access data from these experiments — data that you can use to inform and develop growth strategies.

Disadvantages of dropshipping

As you can see from the long list of advantages associated with it, dropshipping can be a very attractive business model. But it shouldn’t be viewed as a get-rich-quick scheme — it can be tricky to do dropshipping right, and there are some key ‘cons’ to consider as well as pros.

So, let’s take a look at the reasons why dropshipping might not be for you.

1. The profit margins can be low

Because dropshipping is a low-cost, low-risk business model, the barriers to entry are low. This means that you will find a lot of other entrepreneurs entering the dropshipping space, marketing the exact same products as you, and competing heavily on price.

Accordingly, choosing the right niche for your dropshipping store, and gaining a very solid understanding of SEO is key to the success of a dropshipping business — and both these tasks can be time consuming.

2. It’s hard to ensure that the goods you’re selling are ethically produced

The advantage of making your own products, or sourcing them locally to stock and sell, is that you can gain a clear understanding of who made them and how.

With dropshipping however, you’re often completely in the dark about the working conditions in which your goods were made.

Many of the dropshipping apps available for the leading ecommerce platforms make use of dropshipping companies in countries where forced labor and counterfeit good production is not uncommon.

(Some of the print-on-demand dropshipping apps seem to be more proactive in ensuring ethical supply chains, however — examples of these include Printful and Printify).

3. You have limited control over the appearance and branding of your goods

With a lot of dropshipped products, you have little or no control over the appearance of your products: you are generally dealing with ‘off the shelf’ items.

So, if having a product range featuring your own brand is important to you, then dropshipping is not necessarily the best choice.

(That said, print-on-demand dropshipping offers more options on this front.)

4. Suppliers can be unreliable

With dropshipping, you’re often relying on suppliers that you don’t have a personal connection with, and that you can’t extensively vet.

Sometimes this can lead to:

And all this can result in unhappy customers.

5. Managing multiple suppliers can get complicated

If you’re working with multiple suppliers for your dropshipping business, you can end up with quite a complicated supply chain. Different suppliers may have different operational structures in place for shipping, processing and billing — and all this can add up to some potentially tricky admin for you.

These problems aren’t insurmountable, but take dropshipping away from being the ‘hassle-free’ business model that many people consider it to be.

6. Providing customer service can be challenging

When things go wrong with a dropshipping order, providing good customer service can prove a bit challenging. This is because when a problem arises, you are often relying on a third-party supplier — who you don’t know and who may be on the other side of the planet — to solve it.

This may lead to a long wait for a customer who will be puzzled as to why you, as the store owner, can’t simply resolve the issue or arrange a new delivery of a product yourself.

7. Shipping costs can be high

Depending on where your customer base and suppliers are located, you may face quite high shipping costs on your products.

For example, a lot of dropshipping suppliers are based in China, and if the bulk of your customers are based in the US, they — or you! — will have to pay quite a lot of money to get their products delivered to them.

So, how do I start dropshipping?

To start dropshipping, you’ll usually need four key things:

Let’s look at each of these in turn.

An online store builder

As its name suggests, an online store builder (also known as an ecommerce platform) lets you build a website that sells stuff!

Typically, online store builders let you…

Popular online store builders include Shopify, BigCommerce, Squarespace and Wix; of these we feel that Shopify and BigCommerce generally provide the most comprehensive range of dropshipping tools.

Shopify is an ecommerce store builder that is particularly well suited to dropshipping — and in many ways has been designed with dropshipping in mind.

Significantly, it makes a dropshipping starter kit available to its users that contains a dropshipping course and other training resources.

A dropshipping app

In addition to an online store builder, you’ll need a dropshipping app to connect your store to a supplier.

Once installed, this will let you:

You’ll find dropshipping apps in the app store of your chosen online store builder — the range available to you will vary by ecommerce platform, but popular ones include DSers (for Shopify); Modalyst; Spocket, Printful and Printify.

A domain name

In order to ensure that you come across as a legitimate business — and establish trust with potential customers — you’ll need to ensure that you are operating under a credible brand.

Accordingly, before you start dropshipping, you’ll need to put some time into creating a brand identity — deciding upon a business name, color schemes, logos, typefaces etc.

From a digital perspective, a key part of this involves purchasing a domain name for your business (yourstorename.com etc.). Without one, you’ll struggle to be taken seriously as an online merchant.

Many online store builders provide one for free for the first year as part of your subscription, or alternatively you can buy one from established domain name registrars (Namecheap, Gandi, etc.).

An online advertising platform

New dropshipping stores are highly unlikely to perform well in organic search results (search engine optimization takes time to plan, execute and take effect).

So, in order to get a dropshipping business off the ground, you usually need to invest in online advertising.

Typically this involves search engine marketing (SEM) and social media advertising — with Google being the obvious platform choice for SEM, and Facebook and Instagram being the obvious choices for the latter.

How to choose the best dropshipping suppliers

Before choosing a dropshipping supplier, it’s important to do as much ‘due dilligence’ regarding their business as possible.

To this end, there are several key questions that you should ask the dropshipping suppliers you’re considering working with (you’ll usually be able to do this by contacting a dropshipping app’s customer service team).

These questions are:

If you can’t get satisfactory answers to the above questions from a dropshipping supplier, it’s probably time to try another one!