Dropshipping is a business model of sales without stocks. It is also known as “direct fulfillment” or “pack and ship”.
The dropshipping retailer offers some products on an online platform (usually in an online store, your own website or blog, in a social network etc.). The posted goods are not his own – he uses the supplier’s pictures and product descriptions.
The retailer collects orders from customers and transfers them to the actual manufacturer, wholesaler or another retail supplier. In other words, he buys the items from a third party that ships them directly to the customers.
In this model dropshipper doesn’t keep the products in stocks. He never handles and even sees the product. He focuses only on marketing the goods.
The greatest advantage of dropshipping over the standard retail model is that the seller doesn’t stock or own inventory. All goods are stocked at a third party – a wholesaler or manufacturer.
Another great benefit is zero cost of the products’ purchase. It means that a dropshipper spends no money on the supply of goods. He pays for all products with the customers’ money.
In this scheme the source of your income is the margin – the difference between the initial and final prices. The price in your webstore is higher than the supplier’s price. This is why dropshipping can be very profitable