What Is Dropshipping? Explained

After more than a decade in eCommerce, one question still comes up more than any other: “What is dropshipping?”

The truth? It’s not complicated, but there’s a lot of confusion because people approach it the wrong way. In this guide, I’ll explain exactly what dropshipping is, how it works, its pros and cons, and why I recommend one model over all others.

By the end, you’ll know whether dropshipping is the right business model for you.

What is Dropshipping?

Instead of buying stock upfront, you partner with suppliers who keep products in their warehouses. When a customer places an order on your store, you forward the order to your supplier, and they ship the product directly to your customer.

In short,

👉 That’s dropshipping in five simple steps.

Why Would Brands Work With You?

You might be wondering: Why don’t suppliers just sell directly to customers?

The answer is simple. Many brands focus on making great products, not on retail marketing. They rely on approved online retailers like you to bring in customers and generate sales.

That’s where dropshippers come in. You act as the middleman: promoting, marketing, and selling products for legitimate suppliers and brands who don’t sell direct to consumer.

Advantages of Dropshipping

1. Location Independence

The first benefit and probably the one that’s most important to me with drop shipping is being location independent.

Over the past decade I’ve lived in Vietnam, South America, and Thailand. With a drop shipping business, you really can live and work from wherever you want. 

Drop shipping allows a level of location independence that not many of these other business models do. That’s why my coaching program is called “Drop Ship Lifestyle,” because you can be location independent.

2. No Upfront Inventory Costs

Another benefit is that there are no inventory costs. So when you’re starting out with drop shipping, you aren’t laying out any of your money for inventory.

The truth is that when you’re a traditional retailer, inventory is your biggest expense. You need to physically have the products to sell but with drop shipping, you don’t.

All you need is approvals from suppliers to have products. You only pay for items after you sell them and there are no warehouse costs.

Now in the previous section, I wrote about how I started in eCommerce by importing. When I first started, I actually had these inventory and warehouse costs. I was spending tons of money every month to store my products.

But if you use the drop shipping business model, you’re not paying for these expenses, someone else is.

All of your suppliers have their own warehouses and they’re paying to store these items. So it’s another cost that isn’t on your shoulders, something you don’t have to worry about when starting out.

3. No Handling Returns

Another benefit to drop shipping is not having to handle returns. To be clear, if your customer wants to return an item, you’ll still have to forward the return slip from your supplier to your customer.

But these items are not coming to you. If you own a drop shipping business, you won’t have returned products showing up at your house.

They’re going to be shipped back to your supplier, and then based on the policy of that supplier, you’ll get a refund or they’ll ship the customer a replacement item.

One thing that I go into detail within the Drop Ship Lifestyle course is how to find suppliers with low return rates. So ideally, you won’t even have to deal with emails about returns.

4. Gather Data While Getting Paid

This next benefit of drop shipping is gathering data while you’re getting paid.

Let’s say that you want to build a brand in the chandelier niche, you want to sell your own lighting fixtures or chandeliers. Also, let’s assume that you want to be an importer and build your own product line. We’ll also say that you even have the money to invest in it right now.

Well, before you throw money at an import business, have products manufactured, and start trying to sell them… I’d still recommend that you start a drop shipping business in that niche first.

As you’re drop shipping, you’ll be learning what sells. You will quickly be able to find out what your customer wants and building resources that you can use for your own product line. All while making money. Basically, you’re testing out the market while making a profit.

You’ll learn what types of products sell best, what price point you make the most with, and which features customers of your niche want most.

Then, after you’re successful in that niche, you can use all that data to launch your own brand with an importing business.

5. Scalability

Another huge benefit of a drop shipping business is how easy it is to scale. 

For instance, if you are making $100,000 a year in sales from just one drop shipping store, it’s very easy to build more online stores with similar results. The best part is that you can do this over and over again.

I always recommend starting with one drop shipping store, so that you really learn the process, go through it and master it. But after you do it one time, it’s very easy to do it over and over again.

6. Build a Sellable Asset

The benefit of building a drop shipping business is that you’re building a real asset.

Now, when I first started this business, I didn’t realize it, but drop shipping stores are very valuable to a lot of people.

There are a lot of buyers out there that are looking for profitable eCommerce stores, especially drop shipping stores.

Basically, these buyers could just plug themselves into your business and be making money the next day. All without having to take over your inventory or take over a warehouse.

Disadvantages of Dropshipping

Now let’s talk about some of the downsides of owning a drop shipping business when compared to owning your own brand.

1. Smaller Profit Margins

First off, there are smaller margins. Because you’re selling someone else’s products, profits are going to be less than if you created your own products.

If you go to China and have your products manufactured you can negotiate better deals for the product price. That’s because you’re doing a lot more work and taking on a lot more of the responsibility. But your profit margins will be higher.

So with drop shipping, there are usually smaller profit margins than with having your own brands. Later in this guide I will cover the exact margins, but on average, I aim for 25% profit margins with my drop shipping stores.

2. No Inventory Control

Another thing that’s not so great about drop shipping, and in my opinion it’s probably the biggest downside, is that you have no control over inventory.

Let’s say you have one supplier whose product sells well on your website, you’re making great money with them. Well, what happens if that supplier has supply chain issues and runs out of stock? 

Your customers are still going to want to order from you, but you won’t be able to fulfill these orders. You are going to lose potential money in that situation. All because you have no control over the inventory, or because maybe your suppliers aren’t so great about managing inventory and keeping every item in stock.

This is something that great suppliers know how to deal with. Regardless, it’s probably something you’ll run into at least a few times if you decide to build your own drop shipping business.

You’ll run into suppliers who don’t have great inventory management and who do run into supply chain issues and that will lead to lost sales.

I cover how to spot bad suppliers in a later section and in-depth with my course Drop Ship Lifestyle.

3. Increased Competition

The last thing that I could really think of as a negative with drop shipping is the increased risk of competition.

If you create your own brand to sell online, let’s go back to that chandelier niche, and you make ‘Anton Chandeliers’. No one else can go out and create ‘Anton Chandeliers’ because that’s your company and your brand.

When we’re drop shipping, we’re selling other people’s brands that are looking for retailers. And other competitors will likely come across the same supplier and become retailers as well.

So it’s competitive, but if it wasn’t competitive, it would mean there wasn’t money to be made. It would mean there isn’t a market for that niche and it’s probably a bad niche to enter.

Those are my benefits and downsides when it comes to drop shipping. But even with the drawbacks, I always recommend building a drop shipping business.

It’s what I’ve recommended to family and friends. It’s what I teach people because it works.

It’s a great way to build a location-independent business, for little money, with the potential of huge returns, and that could become a major asset.

FAQs About Dropshipping

Now that we’ve covered some of the biggest mistakes new drop shippers make, I’d like to address some questions you might have at this point.

Is dropshipping legal?
Yes. It’s 100% legal. Like any business, you need to understand tax, business licensing, and return policy requirements.

How long does it take to start a dropshipping store?
With the right system, you can launch in as little as a week. Many of my students launch within 2–8 weeks, depending on time commitment.

How much money can you make?
It varies. On average, I see 25% net profit margins. Sell a $1,000 product, and you keep about $250 after costs. With high-ticket items, every order is worth it.

Is dropshipping proven?
Yes. My stores have generated 8-figures in sales, and hundreds of my students have built profitable stores. It works if you follow the right process.

Two Schools of Thought in Dropshipping

1. Low-Ticket Dropshipping

This is the model most “gurus” push… and it’s the one I tell people to avoid.

2. High-Ticket Dropshipping

This is the model I’ve built my business around and the one I teach inside Drop Ship Lifestyle.

Recap: What Is Dropshipping?

• Dropshipping = selling products online without holding inventory.
• You partner with suppliers, list their products, and profit on each sale.
• Advantages: no upfront inventory, location independence, scalability.
• Disadvantages: lower margins, less inventory control, higher competition.
• The right model? High-ticket dropshipping.

👉 Want to dive deeper? Check out our Free Training Class for step-by-step strategies.