“Can I tell you a really easy way to make money online?” asks Maddie, a doe-eyed 20-something, in a TikTok that’s been viewed over 1 million times. It is so easy, in fact, that making money “basically requires no skill at all” — just a laptop and a wifi connection.
Maddie is one of the many hustle-culture figures on the internet who has gained popularity by encouraging their followers to start a business, usually through a practice called drop shipping. All a person needs is an idea of what they’re going to sell, a website, and boom, they’ve got a potentially profitable side hustle that could make anywhere from a couple hundred dollars to a couple thousand per week. “We’re going to be drop shipping with Printed Mint,” Maddie goes on, referring to a print-on-demand company that creates customized products. “Don’t be afraid of that word.”
A few years ago, this disclaimer — that users shouldn’t “be afraid” of drop shipping — might not have been necessary. And several years before that, most people probably hadn’t ever heard of the term unless they worked in retail operations or supply chain management. Drop shipping is the method of shipping an order directly from a manufacturer to a customer’s home, without the retailer holding any inventory. This business model actually predates the internet by several decades and has become integral to how e-commerce operates.
Today, however, many consumers associate drop shipping with a breed of semi-shady e-commerce sellers, notorious for arbitraging wholesale items for profit. These sellers only serve as the middleman between consumers and manufacturers, without seemingly providing any labor or value-add to the products they’re selling. As a result, they’re often regarded as scammers or fraudsters. Michigan’s attorney general has even issued a consumer alert on drop shipping, cautioning people to be wary of whom they buy from online.
Through years of commercialized conditioning, the average shopper has grown accustomed to buying things from online brands they’ve never heard of. People don’t often wonder about where their stuff comes from, how it’s made, or why it takes so long to arrive. Consider the “TikTok-made-me-buy-it” phenomenon, which turns a faddish gadget like a sunset lamp into a coveted item for an online audience. This behavior creates a ripe environment for all kinds of drop shippers, from the “reputable” sellers to the novices hoping to earn a quick buck.
Drop shipping — and the forces that enable an individual to outsource, buy wholesale, rebrand, and sell overseas goods — is a pronounced feature of global capitalism, not a bug. Aided by e-commerce platforms like Amazon and Shopify, this model has sprung from the interwoven, complex network of material suppliers, manufacturers, distributors, and sellers to affect nearly every American who shops online. Still, these business ventures are rarely regulated, at least in the US. Drop shipping has been allowed to persist and proliferate with the backing of some of the biggest e-commerce companies in the world. So, are these “scams” or potentially legitimate business endeavors? It depends on how you consider their middleman role — and, by extension, how these intermediaries are enabled by the global capitalist economy.
Dropshipping is a business model that makes it possible to launch an ecommerce site with thousands of products without the need to store stock of any kind. And once you’ve overcome the ‘blockage’ that is stock management, everything else goes much faster.
But let’s look into this in a little more depth.
The definition of dropshipping
Dropshipping is a form of retail business wherein the seller accepts customer orders but does not keep goods sold in stock. Instead, in a form of supply chain management, it transfers the orders and their shipment details to either the manufacturer, a wholesaler, another retailer, or a fulfillment house, which then ships the goods directly to the customer. As such, the retailer is responsible for marketing and selling a product, but has little or no control over product quality, storage, inventory management, or shipping.
This eliminates the costs of maintaining a warehouse – or even a brick and mortar storefront, purchasing and storing inventory, and employing necessary staff for such functions. As in any other form of retail, the seller makes their profit on the difference between an item’s wholesale and retail price, less any pertinent selling, merchant, or shipping fees accruing to them.
A dropshipping business model does not require a brick and mortar store. It may be eliminated entirely, or combined with drop shipped order fulfillment business model. A physical retailer may keep potential drop shipped items on display, provide details on mail order items via a catalogue, or maintain a website with information available only online. A virtual retailer only has a website.
Dropshipping retailers are not required to disclose the practice, nor, as with any other retailer, the wholesale source of the products they offer. This can be achieved by “blind shipping” (shipping merchandise without a return address corresponding to the seller), “private label shipping” (having merchandise shipped from the wholesaler with a return address customised to the retailer), or utilising a fulfillment house. The ultimate order fulfiller might also include a customised packing slip, including details such as the retailer’s company name, logo, and contact information.
In unusual circumstances drop shipping can occur when a small retailer (that typically sells in small quantities to the general public) receives a single large order for a product. The retailer may arrange for the goods to be shipped directly to the customer from the manufacturer or distributor.
Products may be listed by a drop shipping retailer as available but actually be back-ordered either with the wholesaler or the item’s manufacturer. Such potential delays in order fulfilment are not always known, or even when known disclosed, by a seller. They also can be extended, beyond the control of the seller. Likewise order fulfilment and shipping delays are beyond the seller’s control, yet can reflect badly on the purchaser’s ultimate satisfaction with their transaction. This puts a premium on timely and accurate information provision by the seller on both sides of the purchase, both before and after it is made.
The advantages of dropshipping
Now that we have explained what dropshipping is, we will briefly go over the main advantages of working in this way.
According to Jason Sanchez, CEO of One Net Enterprises (OneInc.com), drop shipping presents your business with numerous benefits:
- Lower Overhead
Says Sanchez, “The costs that go into warehousing and shipping individual items can be tremendous. It doesn’t become efficient to do so, until you do it on a large enough scale.”
- No Inventory Investments
You don’t pay the wholesaler for an order until your customer pays you. And you can test new products without purchasing inventory that may not sell.
- Recovered Time
The time you spent receiving and organizing inventory, printing labels, and packing and shipping orders is time you can now spend promoting your web site and providing faster customer service.
- No Order Minimums
Your wholesale orders are based on your customers’ orders. You can order as many or few items as you need – even down to individual products.
- Broader Product Selection
You can carry items in your product line-up that would be difficult to physically stock. You’re also able to offer large items, such as furniture, without the hassle of trying to ship each piece.
Particularly when you’re getting started, drop shipping is an easy, cost-effective tool for your E-Biz. That doesn’t mean you should limit yourself to using only drop shipping – the most successful retailers use multiple product sourcing techniques. Drop shipping provides a great complement to your other product sourcing methods, and should be one part of your overall product sourcing strategy.