How Dropshipping Works: Facts Every Good Reseller Wants To Know

Employee preparing to dropship products from warehouse.

Wondering how dropshipping works?

You’re interested in starting an online retail business. You’ve heard all this great stuff about dropshipping but you simply don’t know enough to actually go for it. You still don’t know how dropshipping works. Fact is, every reseller whether new or a longtime veteran should know the ins ‘n’ outs of how dropshipping works. That’s just called good business.

It’s actually pretty simple. How dropshipping works:

1) Customer makes an online order on the dropshipper’s website

2) Customer pays the dropshipper

3) Dropshipper/seller takes the profit from the order

4) The order is sent to the Dropshipping supplier who processes the order

5) Dropshipping supplier ships the product to the customer

How Dropshipping Works: It’s In The Details

For a more expanded explanation, dropshipping is a supply chain management system. Retailers do not keep products in stock. But rather forwards customer orders and shipment information to the wholesaler. The wholesaler in turn ships the orders directly to the customer.

Profit is made by the retailer from the difference between the wholesale and retail price.  

The biggest advantage of running an online retail business with the dropship method is not having to carry product inventory. The order process is quite simple. This in turn saves the business owner a tremendous amount of time. 

Again, you just receive an order from a customer on your online store. Then you send the order straight to the vendor. They will process the order for you. After which, the wholesaler fulfills the order. They then ship the product right to the customer. Never once do you have to deal with any inventory.

Dropshipping And Your Profit Margin

Regarding the profit margin. Here’s how it works: Remember, you’re charged a wholesale price by the vendor. You in turn charge a retail price to your customer. The profit is the difference between the wholesale price and the retail price. Typically, wholesalers will offer margins somewhere around 35%. Or even higher.

Dropshipping Charges And Fees

Every time a wholesaler ships out product to a customer they will then charge your business credit card. This is kept on file at the start of your working relationship with them. So since you’ve already gotten your money from the customer your profit is the difference between what they paid you and what you’ve been charged by the wholesaler. One more thing: some dropshippers charge a dropshipping fee each time they send out a customer order. Fees vary depending on the wholesaler and the size of the product. It’s also okay to work in such fees into your retail prices.

eBay: The Dropshipping Rules

While there are many droship companies throughout the U.S., you can also dropship with Amazon and eBay. Here’s how dropshipping on eBay works:

If you have an eBay seller account you can dropship on their platform. You simply source products from a wholesaler exactly like the information provided above. Same rules apply. But you want to make sure the wholesaler or supplier provides quick and reliable shipping.

After that, you’ll need to create your eBay listings. Then post. You’ll also need to decide how to market your products and your retail prices. You should also know that you fully responsible for shipping time and quality of your products. eBay makes you 100% responsible for these aspects of your dropshipping business. You should also be aware of the following:

  • eBay charges listing fees
  • However, the first 50 listings are free. Nonetheless, those fees can add up.
  • Not many customization tools for your online store
  • While selling on eBay is a great way to start an online store, you are very limited when it comes to customizing your business. This makes it a challenge to stand apart from your competitors.

Here’s a link to eBay’s dropshipping policy information. 

Amazon: Dropshipping Policy Is Not The Same

Amazon also offers dropshipping services to resellers. Thing is, they source the products for you from suppliers all over the world. Their program is slightly different in that you can actually run ads for your online store on the Amazon site. This helps you build organic traffic. 

But Amazon has very strict guidelines in terms of their dropshipping program and resellers. While it’s not exactly complex, it’s worth it to look at the company’s dropshipping policy to really understand how dropshipping on Amazon works.

That said, there is possibility to successfully run a profitable reseller business on both platforms. There’s plenty of information online that explains how to get started on eBay and Amazon. And how to make your business profitable. All it takes is a little research.

Find The Right Dropshipping Wholesaler Is A Must

While the process of dropshipping is fairly simple, finding the right wholesaler to create a dropshipping relationship can sometimes be a challenge. You want to work with a reputable seller who places priority in offering excellent service and quality products.

That’s where we come in. At GreenDropShip we proudly offer over 20,000 products in our inventory. We excel in working with resellers to make sure their businesses are thriving and profitable. Our customer service is unsurpassed. Not only that, we do our best to make the dropshipping process a no-brainer for our resellers. That’s so you can focus all your time in making your online shop a great success.

Check out our catalog today and find out how we can help make your business a winner.