Dropshipping for Dummies: What Is It + How Does It Work?

Key highlights

• Learn how dropshipping simplifies starting an online business by eliminating product inventory and logistics management. 
• Understand what is dropshipping and how suppliers ship products directly to customers on your behalf. 
• Explore how understanding the fulfillment process ensures smooth order management and customer satisfaction. 
• Uncover how retail arbitrage lets you buy discounted products and resell them through a dropshipping platform for profit. 
• Know why choosing reliable dropshipping partners and overseas suppliers is crucial for product quality and timely delivery. 

Introduction

Want to launch an online business without handling packaging, shipping or inventory? Dropshipping makes this possible for you. 

Here’s how it works: You create an attractive online store and market products you love. Then a third-party provider ships products directly to your customers. You focus solely on growing your brand, marketing and customer service. 

But what is dropshipping? How does it operate? Is this business model right for you? 

In this guide, you’ll learn the essential steps to start dropshipping. You’ll also discover how this model compares to other eCommerce approaches. 

Ready to explore a business with minimal overhead? Let’s dive in. 

Are you prepared to dive right in? Let’s explore the wonders of dropshipping! 

What is dropshipping?

Dropshipping is an eCommerce business model where you sell products online without holding any inventory. Instead, when a customer places an order, you purchase the item from a third-party supplier who ships it directly to the customer. This low-risk, low-overhead approach is popular with new entrepreneurs looking to start a store online. 

For example: 

If you sell eco-friendly products and someone orders a bamboo toothbrush, the order is automatically sent to your dropshipping supplier. They handle packaging and shipping, so you never have to manage inventory or logistics. 

Also read: Understanding Dropshipping Meaning: A Complete Guide for Beginners 

How dropshipping differs from traditional retail or wholesale models?

Dropshipping is a retail fulfillment method where the seller doesn’t keep products in stock but instead transfers customer orders to a third-party supplier who ships the items directly.  

Unlike traditional eCommerce models that require upfront inventory investment, storage space and in-house order fulfillment, dropshipping eliminates the need to manage stock or shipping. This significantly lowers startup costs and simplifies operations.  

However, it also means less control over product quality, shipping times and pricing — and often results in lower profit margins compared to traditional retail or wholesale approaches. 

Here’s a simple breakdown: 

Feature	Dropshipping model	Traditional eCommerce model
Inventory	No need to pre-purchase inventory	Must buy and store inventory
Shipping	Handled by dropshipping suppliers	Handled by the seller
Risk	Lower risk, as you only buy when a customer places an order	Higher risk with unsold stock
Profit margin	Typically, lower margins, as you’re buying from a third-party supplier	Higher margins, but you bear the full cost

In 2024, the global dropshipping market was valued at $366.76 billion, and it’s set to surge to $470.92 billion in 2025. With a projected CAGR of 28.43%, the market is expected to skyrocket to $3,479.1 billion by 2033, according to Straits Research. This remarkable growth highlights the increasing appeal of the dropshipping model for entrepreneurs and businesses alike. 

Now, let’s break down how dropshipping works and why it’s gaining such momentum. 

How does dropshipping work?

Now that we know what is dropshipping, let’s see how it works. 

The dropshipping process is simple and follows a few key steps from store setup to earning a profit: 

1. Find dropshipping suppliers 
2. Set up an online store 
3. Customers place orders on your website 
4. You forward the orders to your supplier 
5. The supplier ships the product directly to the customer 
6. You earn the profit margin 

1. Find dropshipping suppliers 

The first step to starting a successful dropshipping business is finding reliable suppliers. Your supplier is the backbone of your operation — they handle inventory, packaging, and shipping, so it’s crucial to choose wisely. Look for suppliers with a solid track record, good reviews, and reasonable shipping times. 

2. Set up an online store 

To start dropshipping, you first need to create an online store that showcases the products you plan to sell. This can be done using platforms like Shopify, WooCommerce or BigCommerce. You don’t need to hold any inventory — just add product images, descriptions and pricing. 

3. Customers place orders on your website 

When a customer visits your site and places an order, they pay the retail price you’ve set for the product. 

4. You forward the orders to your supplier 

Once an order is placed, you send the order details to your dropshipping supplier. Some platforms can automate this process. 

5. The supplier ships the product directly to the customer 

The supplier handles packaging and shipping, delivering the product straight to your customer’s door. You never touch or manage physical inventory. 

6. You earn the profit margin 

You keep the difference between what the customer paid and what you paid the supplier, minus any advertising costs. 

Example: If a customer pays $30 for a reusable water bottle and it costs you $15 from the supplier plus $5 in social media advertising, your profit is $10. 

Types of dropshipping 

With the dropshipping business model, you can source products in several ways. Here are the three most common types of dropshipping.  

Here are the three most common types of dropshipping: 

1. Product reselling 
2. Print on demand 
3. Wholesale dropshipping method 

1. Product reselling 

Product reselling leads the list as the most common type. It includes subcategories like shipping from China, branding dropshipping products with logos and creating niche stores. 

Product reselling has the most competition and the lowest barrier to entry. It’s also the most suitable type for beginners because of the light upfront costs. 

Product reselling has the most competition and the lowest barrier to entry. 

2. Print-on-demand 

Print-on-demand (POD) dropshipping specializes in customizing products with designs you or your customers provide. As orders come in, your POD supplier prints the designs on items like T-shirts, mugs and posters. Then, the supplier sends the finished products directly to your customers. 

This model is popular among creative entrepreneurs who want to monetize their designs without worrying about inventory and shipping logistics. However, converting buyers to creative items is hard unless there’s a “wow” factor. So, you’ll need a higher budget to succeed. 

Also read: 7 Best Print on Demand Sites + How They Work

3. Wholesale dropshipping 

Wholesale dropshipping involves partnering with a traditional retail business to sell its products at a higher price, earning a profit from the markup. In this model, you market and sell the products, while the wholesaler handles inventory and shipping. 

This model is an excellent choice if you already have a relationship with a brick-and-mortar business. If not, getting started could be challenging since many wholesale dropshippers are already online. 

Key players in the dropshipping model 

1. Seller of record 

The Seller of Record is the entity responsible for facilitating the sale, managing transactions and ensuring compliance with legal and regulatory requirements.  

In the dropshipping model, the online retailer or store owner often assumes the role of the Seller of Record. They handle customer orders, payments and overall customer experience, even though they don’t physically handle the products.  

The Seller of Record may also manage marketing, customer service and returns. 

2. Manufacturers 

Manufacturers are the entities responsible for producing the actual products.  

Manufacturers collaborate with retailers to supply products directly to customers without the retailer having to stock inventory.  

Manufacturers play a crucial role in maintaining product quality, ensuring timely production and often dropshipping products in bulk to retailers. These retailers, in turn, fulfill individual customer orders on demand. 

3. Wholesalers 

Wholesalers act as intermediaries between manufacturers and retailers in the dropshipping model. They purchase products in large quantities from manufacturers and then sell smaller quantities to retailers, often at a discounted price.  

Wholesalers enable retailers to access a wide range of products without having to deal directly with multiple manufacturers.  

In dropshipping, usually a wholesaler may be involved in the supply chain by providing products to retailers. Retailers in turn use the dropshipping model to fulfill orders directly to customers.  

Step-by-step guide on how to start a dropshipping business in 2025  

Starting a dropshipping business in 2025 is easier than ever, but success depends on the steps you take and how well you plan your business.  

Here’s a step-by-step guide to help you get started:  

1. Choose a profitable niche 
2. Set up your online store 
3. Find reliable dropshipping suppliers  
4. Create your product listings  
5. Set competitive pricing and shipping rates  
6. Market your dropshipping store 

Step 1: Choose a profitable niche  

The first step in setting up your dropshipping business is choosing a niche and understanding what is dropshipping.  

A niche refers to a specific segment of the market you want to target. This could be anything from eco-friendly home goods to pet accessories or fitness equipment.   

Your niche should be something that not only interests you but also has strong demand and minimal competition. To choose a profitable niche, consider the following:  

• Market research: Analyze trends, customer preferences and competitors.  
• Demand: Use tools like Google Trends, SEMrush or industry reports to gauge demand.  
• Passion and expertise: Select something you’re interested in, as it will help with marketing and customer engagement.  

For example, let’s say you decide to sell eco-friendly home goods. You’ve found that this niche is growing in popularity and there are multiple reliable dropshipping companies offering these products. Now, you can narrow down your product list and focus on items that meet the criteria of high demand and reasonable profit margins.  

Or if you’re passionate about fitness, a niche like eco-friendly yoga mats or sustainable workout gear might appeal to a growing audience concerned about sustainability.  

Step 2: Set up your online store  

To start dropshipping, you’ll need a reliable and professional online store. Your online store will be the heart of your dropshipping business — it’s where potential customers will discover your products, make purchases and form lasting impressions of your brand. That’s why choosing the right platform is crucial. A reliable eCommerce provider can streamline operations, reduce manual work and equip you with essential tools for managing orders, payments and customer communication effectively. 

Choose a platform like Bluehost WooCommerce hosting, which comes with pre-installed WordPress + WooCommerce, built-in dropshipping tools (secure payments, product filters, wishlists) and automated supplier integration—so you can launch and scale your store with ease. 

With Bluehost, WooCommerce auto-installs, giving you access to a library of responsive eCommerce templates, Creative Mail for email marketing, Yoast SEO for optimization, and CodeGuard for daily backups—everything a dropshipping store needs to run smoothly.  

You also get essential dropshipping tools like secure payment processing, product subscriptions, product filtering, wishlists and advanced product reviews to boost customer engagement and conversion. 

Marketing tools like email templates, social logins, sales & promotions builder and Yoast SEO help drive traffic and sales through search engine optimization. In addition, features like shipping labels, bookings, gift cards and 1-click checkouts improve the customer experience. 

Security is covered too, with free SSL, malware scanning, DDoS protection and daily backups, ensuring your store runs smoothly and safely. 

Ready to launch your dropshipping store? Start with Bluehost WooCommerce hosting and build your online store with ease and be a business owner. 

Step 3: Find reliable dropshipping suppliers  

One of the most crucial aspects of running a successful dropshipping business is finding dropshipping suppliers you can trust. You want suppliers that offer high-quality products, have reliable shipping times and maintain a good relationship with their customers.  

Popular dropshipping platforms provide access to a wide range of dropshipping suppliers. Some popular dropshipping suppliers include:  

• AliExpress: A massive platform offering millions of products from suppliers worldwide.  
• SaleHoo: A directory of verified suppliers with a focus on product quality and customer service.  
• Doba: A platform that allows you to access a range of suppliers and integrate them directly into your store.  
• Spocket: Specializes in suppliers from the US and Europe, offering faster shipping times compared to other dropshipping companies.  

Always vet potential suppliers by reading reviews, checking product quality and understanding their dropshipping agreement contract.  

For example, if you’re in the beauty industry, you might partner with a supplier that offers organic skincare products. When a customer places an order, the supplier will ship it directly to the customer, without you needing to handle the product yourself.  

Or if you’re in the fashion niche, suppliers like Printful (for print-on-demand items) or Spocket (for US-based suppliers) can be good options. You want to ensure these suppliers can handle customer orders efficiently and meet your standards for product quality.  

Step 4: Create your product listings  

Now that you’ve selected a niche and dropshipping supplier, it’s time to create your product listings. Your product listings should be clear, engaging and optimized for search engines. Include:  

• High-quality images: Showcase your products with clear, attractive images that help customers make decisions.  
• Compelling descriptions: Write descriptions that not only explain the product but also highlight its benefits and features.  
• SEO optimization: Use relevant keywords like “dropshipping business” and “dropshipping suppliers” to ensure your products are discoverable online.  

Make sure to include key details like shipping fees, estimated delivery times and any guarantees related to product quality. Effective product listings can significantly impact on your ecommerce sales by increasing customer trust and driving conversions.  

For example, let’s say you’re selling eco-friendly water bottles. Your product listing should include information about the material, size options and any environmental benefits. Include a few lifestyle images showing the product in use.  

Tip: Don’t just copy the supplier’s product descriptions—create unique and engaging copy that appeals to your target audience. This will also help with SEO, making it easier for potential customers to find your dropshipping store online.  

Step 5: Set competitive pricing and shipping rates  

Pricing is a critical part of your dropshipping strategy. With the dropshipping model, you don’t have the overhead costs of own inventory, but you still need to factor in the cost of your products, shipping costs and any other associated fees. To stay competitive, you’ll need to research pricing models in your niche and adjust accordingly.  

For example, if your dropshipping supplier offers products for $20 and shipping costs are $5, your total cost is $25. If you sell the product for $35, you’d make a $10 profit per sale, minus transaction fees. Ensure that your shipping rates are clear and competitive and don’t forget to factor in any additional costs like shipping fees when determining your final price.  

Also read: How to Start Dropshipping: A Step-by-Step Guide  

6. Market your dropshipping store 

Once your store is set up and your products are listed, it’s time to focus on attracting customers. Effective marketing strategies can help drive traffic to your store and convert visitors into buyers. Here are some proven methods: 

• Social media advertising: Platforms like Facebook, Instagram, and TikTok offer targeted advertising options to reach your ideal audience. 
• Search engine optimization (SEO): Optimizing your website and product pages for search engines can improve your visibility and attract organic traffic. 
• Content marketing: Creating valuable content, such as blog posts or videos related to your niche, can establish your brand as an authority and draw in potential customers. 
• Email marketing: Building an email list allows you to engage with customers, promote new products, and encourage repeat purchases. 
• Influencer partnerships: Collaborating with influencers in your niche can help you reach a wider audience and build trust with potential customers. 

Implementing a combination of these strategies can significantly increase your store’s visibility and drive sales. 

Top eCommerce platforms for dropshipping business models 

To get started with dropshipping, it’s important to choose the right eCommerce platform that will allow you to easily integrate suppliers, manage orders and handle your business efficiently. Here are some popular platforms that can help you launch your dropshipping business: 

WooCommerce 

A great option for WordPress users, WooCommerce allows you to turn your existing WordPress site into a fully functional eCommerce store. It’s highly customizable and budget friendly. With WooCommerce, you can integrate dropshipping suppliers easily and use Bluehost’s eCommerce hosting to get your online store up and running with minimal effort. 

Shopify 

Shopify is one of the most popular platforms for dropshipping because it offers a straightforward setup and seamless integrations with dropshipping suppliers. You can easily add products, set up your store and manage customer orders all in one place. 

BigCommerce 

BigCommerce offers strong features for dropshipping, including built-in tools to help you find dropshipping suppliers and manage your store. It’s a solid choice for businesses aiming to scale. 

Wix 

Wix is another user-friendly platform that makes setting up a dropshipping store quick and easy. It also has a marketplace of dropshipping suppliers ready to work with you. 

Squarespace 

Squarespace is a popular website builder that offers eCommerce functionality. While it’s not as robust as Shopify or WooCommerce for dropshipping, it’s a good option for beginners looking for an easy, visually appealing online store. 

How to choose the best dropshipping suppliers? 

A reliable supplier ensures timely delivery, consistent product quality and smooth communication — all of which impact your customer experience. Before committing, take time to research, test products and verify how well the supplier integrates with your online store. 

Key things to look for: 

• Fast and reliable shipping times 
• High-quality products with good reviews 
• Responsive and helpful customer support 
• Real-time inventory and order tracking 
• Easy integration with your eCommerce platform 
• Clear return and refund policies 
• Option to order product samples 

Also read: A Beginner Step-by-Step Guide to WooCommerce Dropshipping

What are the benefits of dropshipping?

If you want to make your eCommerce dream a reality, dropshipping might be the best business model for you. 

Here are the benefits of dropshipping: 

1. Low startup costs  

Traditional eCommerce requires upfront investments in stock, staff and storage. With dropshipping, you skip inventory costs and can launch with as little as $500, saving thousands on warehousing and shipping.  

2. No inventory management  

Suppliers handle production, storage and shipping—freeing you to focus on marketing and customer service. For example, a dropshipping clothing store avoids stocking every size and color, reducing overhead and shipping steps. 

3. Wide product selection  

Test and launch products risk-free without buying inventory. Run a general store to explore trends or a niche store to upsell related items—like pairing a face-washing device with beauty tools and skincare products. 

4. Flexibility and scalability  

Easily pivot based on trends or customer demand. Scale horizontally by adding new products or channels or vertically by increasing ad budgets—no warehouse expansion or new hires needed. Your only limit is supplier capacity. Additionally, you can easily fulfill orders from anywhere as long as you have an internet connection and a reliable laptop.  

What are the disadvantages of dropshipping?  

Although this business model has some major advantages, there are some downsides. Here are the potential disadvantages of dropshipping. 

1. Low profit margins 

Marketing and product costs often shrink profit margins in dropshipping. Cold ads take time to convert and suppliers also need their cut. To stay profitable, calculate your product, shipping and marketing costs—then price accordingly. Focus on a familiar market and negotiate with suppliers to improve ROI. 

2. Inventory and supplier issues 

You depend on suppliers, which means limited control over inventory and product quality. Delays, wrong items or damaged goods affect your reputation. Avoid this by vetting reliable suppliers with strong reviews and low MOQs. 

3. Limited control over shipping 

Shipping delays — especially from international suppliers—can frustrate customers and erode trust. Consider sourcing from U.S. or local suppliers to improve delivery speeds. According to a 2018 report by MetaPack, 70% of online shoppers are willing to pay extra for faster and more convenient delivery options, including one-hour, same-day, or even Sunday delivery. Slow order fulfillment process hurts your brand. Speed up delivery by sourcing from U.S. suppliers or storing bulk inventory locally. Always set clear expectations with buyers.  

4. Customer service challenges 

Shipping delays, damaged goods and refund requests can pile up as sales grow. Preemptively build systems to manage support before scaling to avoid overwhelmed inboxes and unhappy customers. 

Also read: Is Dropshipping Worth It in 2025? Pros and Cons 

Common misconceptions/myths about dropshipping 

Dropshipping has gained popularity as an accessible way to start an online business, but some misconceptions persist.  

It is often believed that dropshipping is illegal or unethical but that’s certainly not the case. Some people mistakenly believe that dropshipping is illegal or unethical. Dropshipping is 100% legal and can be a legitimate business model when conducted properly, respecting legalities and ethical business practices. 

 Here’s the truth about such five misconceptions to help you understand what’s real and what’s not. 

1. Dropshipping is a get-rich-quick scheme 

As with any method to make money online, some sellers have quickly profited by making outrageous claims and promises. However, dropshipping is not a guaranteed path to instant wealth. It requires hard work, dedication and strategic planning to succeed — just like any other business. There’s also a misconception that no investment is needed. While it’s true that inventory costs are lower compared to traditional retail models, expenses like website hosting, marketing and product sourcing still require investment.   

2. It’s impossible to build a brand with dropshipping 

Contrary to this belief, many successful dropshipping businesses have built strong brands. The key is to provide exceptional customer service and select high-quality products. Also, remember that dropshipping is just a business model, not your brand’s identity. You need to craft a unique identity to set your brand apart from the competition. 

3. You don’t need to put in any effort 

Dropshipping requires effort in areas such as product selection, marketing, customer support and supplier management. While it may be less labor-intensive than a traditional eCommerce business, you still need to invest time and energy into building and maintaining a successful business. Don’t expect to make millions on your first store with little effort. 

4. Dropshipping guarantees high profit margins 

The profit margins can be low due to supplier and marketing costs. Efficient marketing strategies, strong supplier relationships and high-quality products that resonate with your target audience are essential to achieving higher profits. 

5. All dropshipping suppliers are reliable 

Not all suppliers are equal. Working with unreliable suppliers can lead to issues with product quality, shipping times and customer satisfaction. It’s crucial to research and vet potential suppliers thoroughly to ensure they meet your standards. 

Tips for successful dropshipping 

Keep the following tips in mind to increase the chances of your dropshipping business succeeding. 

1. Choose the right products 

When starting a dropshipping business, product research can be a struggle for some. There is a tendency to overthink it or simply choose products that don’t sell. 

When you’re searching for the perfect product for your dropshipping business, keep an eye out for products that: 

• Solve a real problem. 
• Have a “wow” factor. 
• People feel passionate about it. 

Products that solve a problem tend to be the easiest to sell. For example, many people sit at a desk chair all day, resulting in poor posture. As a result, the dropshipping community recently had success selling a posture corrector. 

 This product was cheap to make and easy to ship and could sell at a decent price range of $20 to $30 plus shipping. It solves a problem, making it easy to market. Plus, it’s a product that someone could easily impulse buy. 

Also, look for products with a unique twist. For example, the product below offers a “wow” factor that could cause people to buy it immediately. 

This alarm clock jumps off a desk or nightstand, forcing the user to get out of bed and turn it off. 

Lastly, look for products in niches that people are passionate about. Some examples include beauty, pet and garden products. 

2. Select a platform with reliable, fast hosting 

Your website’s loading speed and uptime can significantly impact on your customer experience and your store’s conversion rate. According to Bidnamic, your website speed correlates with your conversion rate. The study found that you can increase your conversion rate by 17% for each second you shave off your loading time. 

With WordPress WooCommerce hosting, you can build a fast WordPress website with an eCommerce plugin. You can have full control over the design or choose from pre-built, winning eCommerce templates. 

3. Find reputable suppliers 

Dropshipping companies often supply products from either China or the USA. You’ll need to ensure your supplier offers high-quality products regardless of which source you choose. 

Here are some common websites to explore third-party suppliers: 

• Alibaba (China and USA) 
• AliExpress (China)
• Spocket (USA) 

Look for shippers with solid reviews, fast shipping times and quick response times. Once you’ve made your choice, contact your supplier and build a relationship. You will be business partners, after all. 

And because it’s mutually beneficial, you can often negotiate prices on product cost at scale. 

4. Create an appealing online store 

When building an online store that converts visitors into customers, you’ll need to optimize these factors: 

First, you need to ensure your brand aesthetic matches the products you offer. For example, a beauty store benefits from colors like white, light pink or light orange. 

Conversely, a sleep store benefits from soothing shades of blue, purple and white. 

Next, focus on positioning your products as the go-to, best-in-class options available. Because many sellers use the same supply chain, your marketing and positioning must differentiate your brand. Maybe it’s your brand story or a unique marketing angle — find a way to stand out. 

Pro tip: Highlight the benefits, not the features, on your product pages. If you’re selling a posture corrector, don’t say it will straighten their back. Focus on how the customer will feel more confident once they achieve perfect posture. This distinction separates good copywriting from great copywriting. 

5. Craft effective marketing strategies 

Your marketing strategies will make or break your business. They will set your brand apart from the competition while driving targeted traffic. And when done properly, they can help you scale to extraordinary heights. 

First, choose an ad platform: TikTok, Facebook/Instagram or Google. This choice depends on your target audience. Try to guess where they spend the most time and where they’d most likely purchase. 

Each platform has different formats. For TikTok, you likely need to film yourself or an actor with the products. However, you simply need text for Google. 

As for filming or designing the ads, you want to hone in on the first two seconds. 

In essence, the first two seconds should communicate why the viewer should stop and watch your ad. 

It could be a surprising benefit or fact, a compelling visual or an intriguing question. 

Finally, focus on your ad’s copywriting, including the script for your video and the text that goes along with it. Your copy should be clear and concise and invoke an emotional response. 

Dropshipping alternatives  

Dropshipping isn’t your only option if you want a low-risk online business. Print on demand lets you sell custom products like t-shirts or mugs without holding inventory—perfect for creatives.  

Wholesale buying involves purchasing in bulk and gives you more control over pricing, though it requires upfront investment. Private labeling allows you to sell generic products under your own brand, helping you build a stronger identity.  

You can also consider affiliate marketing, where you earn commissions by promoting other brands’ products—no inventory or shipping involved. Lastly, digital products like eBooks, templates or online courses offer high margins and zero logistics. Choose the model that best fits your skills, budget and long-term goals. 

Final thoughts 

Dropshipping offers aspiring online entrepreneurs a unique and enticing business model. It eliminates many of the traditional barriers to entry, like inventory and shipping costs. That allows you to focus on building your brand, connecting with customers and finding the best products possible.  

To succeed with dropshipping, you need more than just a great idea and understanding of what is dropshipping. You need the right tools. With Bluehost WooCommerce hosting and our AI-powered website builder, you can launch a professional, high-converting store in minutes. Enjoy fast, secure hosting, seamless supplier integration and everything you need to grow your business online. 

Start your dropshipping store with Bluehost today — simple, smart and built to scale. 

FAQs