Have you ever wondered: how does dropshipping work, and what is it? I’ll tell you: Dropshipping is a way to source things to sell without having to actually pay for them first. The advantage in dropshipping is that you’re not risking any of your own money, because you only buy the stock once you’ve actually made the sale. If you can’t sell the product… you’re not out of pocket.
It also requires very little money upfront, so if you don’t have a lot to invest… dropshipping is the perfect way to get started making money selling things online.
How does dropshipping work?
It’s pretty simple really. A dropshipper lets you list THEIR products in YOUR online store (or on eBay or Amazon) as if you already had the stock in your hands. You don’t even need to have purchased the goods first:
Diagram answers question: how does dropshipping work?
When a customer buys the product from you and you’ve received their payment, you just go to the dropshipper, let them know you’ve made a sale, purchase the item (easy, because you’ve got money from your customer!) and let the dropshipper know your customer’s address. The dropshipper then sends the product directly to your customer.
You never even have to touch the product!
Still wondering how does dropshipping work? Here is an example to help you out. Sally wants to make a bit of cash by selling things on eBay with dropshipping…
- Sally contacts a dropshipper who specializes in furniture, and gets a copy of their wholesale catalog.
- She picks an item from their catalog: A modern-looking couch that they are selling for $500 (including delivery).
- She goes to her eBay account and creates a listing for the couch — just as if it’s her own couch she’s selling. She decides to sell it for $1000 (including shipping).
- After just one day, Sally has a buyer. Somebody buys the couch through her eBay listing. They pay Sally $1000.
- After dancing around her living room a little bit, Sally contacts the dropshipper and tells them she’s made a sale. She pays $500 for the couch (catalog price) and gives them her customer’s shipping address.
- The dropshipper ships the couch to the customer, and Sally is $500 richer. All for one hour’s worth of work.
Good things about it:
- No up-front costs: you only buy goods once you’ve already sold them and received the money. Brilliant if you’re just starting out.
- You can list a huge range of goods: Because you don’t need to buy them up front. Imagine having a store with a huge range of stock, and you don’t have to pay for ANY of it until you sell it. If you list an item and it doesn’t sell… no biggie!
- You won’t lose money: That’s one of the really big risks with buying goods up front. If you buy a big pile of purple spatulas and you can’t sell them for more than what you paid for them… you lose money. It’s always a bit of a gamble. But with dropshipping… no gamble at all 🙂
- It’s soooooo much easier: You don’t have to worry about storage, packaging, shipping costs, endless trips to the post office. You don’t have to wait three weeks for your goods to arrive before you can even start selling them. You can have an item listed and sold and on its way to the customer within hours. That’s fast money!
- You can sell awkward things with big profit margins: Sometimes the bigger and more awkward the item (like couches), the bigger the profits you can make. Selling these items conventionally (buying the stock and storing it yourself) would be impossible. But with dropshipping you could be living in a tiny apartment and dropshipping ten grand pianos a week… because you don’t store or ship them yourself!
Not only have I explained how does dropshipping work, but I’ve shown you why it is such a lucrative business model. But is it everything that it seems?
It sounds too good to be true — Is there a catch?
I’ve answered the question of how does dropshipping work, but here is a new one: is there a catch?The honest truth is that there isn’t really a catch. It is that simple. But there are some “tricky” parts to dropshipping:
- Finding dropshippers with low enough prices for you to make a good profit. You need to find a dropshipper with lower catalog prices than what you can sell it for on Amazon, eBay or in your own store… but finding dropshippers with genuinely good prices can be tricky.
- Finding dropshippers that you can trust: Imagine if Sally if gave her dropshipper $500 to ship the couch, and they never did. She’d have to refund her customer the full $1000, and she’d kiss goodbye to that $500 she gave the dropshipper.
To learn my step-by-step action plan for making $10,000/month with dropshipping (without start-up money) grab my ebook below. It reveals more advice on how does dropshipping work, and I’ll show you some examples of the kinds of products and suppliers that’ll make you the most money.