what is dropshipping business

What is dropshipping business, and how does it work?

Table of Contents

Did you know that dropshipping allows businesses to sell products without ever holding inventory? 

This model has become incredibly popular because it enables startups and emerging businesses to launch with minimal upfront investment and expenses. By eliminating the need for maintaining physical inventory, dropshipping allows entrepreneurs to focus on growing their sales and expanding their business with reduced financial risk.

In today’s fast-paced and ever-evolving digital world, the way various industries conduct business has dramatically transformed.

Retail is no exception. A new retail business model, known as dropshipping, has gained significant popularity among both companies and entrepreneurs. Dropshipping has revolutionized the way goods are sold and how small businesses operate in the e-commerce space. 

This means they don’t have to worry about managing logistics operations, and they can focus on sales and customer service instead.

What is dropshipping business?

Dropshipping in short, is an innovative business model that eliminates the need for a business to deal with complex logistics operations like warehousing, inventory management, and shipping

It works by having the seller receive and accept an order, but instead of fulfilling it himself; the manufacturer or wholesaler is the one who will be responsible for the fulfillment process and shipping of the goods directly to the customer.

what is dropshipping business

As you can imagine, dropshipping now plays an essential role in modern e-commerce because it has entirely changed how businesses operate online. 

Since this model eliminates the need for retailers to store and manage inventory at a warehouse and shipping logistics; the opportunity to start a business becomes more accessible and affordable for everyone rather than the traditional retail model where the seller would be responsible for every single aspect of the fulfillment process. 

With the dropshipping model, traditional roles and responsibilities are modified and shared between suppliers, retailers, and customers.

The Role of Retailer

Retailers are responsible for creating the online store, promoting their products, pricing, receiving and accepting orders; and then accurately transferring them to the manufacturer or supplier along with the information of where and to whom they will be shipped as well as payment information. 

Retailers also handle customer support and customer service and oversee that their customers are satisfied with their purchases.

The Role of Suppliers

Suppliers are in charge of manufacturing the products or sourcing them. They are the ones who will handle storage, inventory management, restocking, packaging, and shipping to the customer on behalf of the retailer. 

They are responsible for the accuracy and quality of the order, making sure that the customers receive the correct items and quantity and that they’re received in good condition and on time.

The Role of Customers

Customers are the end-users placing an order and purchasing from the online store. They’re expecting a great shopping online experience with no hiccups, fast delivery, and great quality. Orders are placed through the website (retailer) and received from the manufacturer (supplier) acting on behalf of the retailer.

How Dropshipping Works

One of the reasons why Dropshipping is so popular is because it optimizes costs, time, and resources very efficiently with a very straightforward process. Here is a step-by-step breakdown of how it works:

Selecting the Products

This involves the business selecting which market niche it will be catering to and identifying the products that will appeal to this market of their choice. This is also known as selecting the business concept. 

The second part consists of finding the supplier for these products that will be sold on the online store and partnering with them, ensuring that they will handle storage, packaging, and shipping to customers.

Order Fulfillment and Shipping

Consists of receiving and accepting the orders placed online through the e-commerce store or website and then forwarding them along with all their details to the supplier after the payment has been processed. 

what is dropshipping business

Once received by the supplier, they prepare and ship the items directly to the customer.

Advantages and Disadvantages of Dropshipping

As with every other model, dropshipping has its specific advantages and disadvantages that can impact a business. It’s important to know both to evaluate if it’s the best option and make informed decisions. 

Advantages of Dropshipping

  • Low Initial Investment: Since there’s no need to have and store physical inventory, companies save the costs of hiring warehousing and transportation.
  • Trying New Products and Having Unlimited Variety of Products: Not having a physical inventory creates a type of “on-demand” service where the retailer has the opportunity to try new products and also offers a large variety of them without having to worry about storage. This gives them a very competitive advantage in attracting more customers to the online store.
  • Overall Reduced Expenses: Businesses that adopt the dropshipping model save on warehousing, shipping, transportation, and other complex logistics services that will be handled by the supplier instead.

Disadvantages of Dropshipping

  • Lower Profit Margins: Since there’s no holding any inventory, the cost of goods sold is relatively low, but the profit margin is also lower because of these reduced costs.
  • No direct control over product quality: The quality of the products is up to the manufacturer and the only way to make sure it meets your expectations is by ordering a sample yourself.
  • Higher Competition: Since dropshipping is a very popular model, there is a lot of competition and many businesses might offer the same or very similar products.

Setting Up a Dropshipping Business

Setting up a dropshipping business is relatively easy compared to traditional retail stores, provided that you can find reliable suppliers that meet the expectation of managing their operations promptly, and that take good care of the quality of the products to meet your customers’ expectations.

what is dropshipping business

Two of the most important aspects when setting up a dropshipping business are:

Finding a Reliable Supplier

Look for a dropshipping supplier that offers you the following:

Quality and Profitability

Make sure that the products offered undergo quality control and that they will meet your and your customer’s expectations to keep customer satisfaction and loyalty and reduce returns and refunds.

A good way to find out the quality of a specific item from a supplier is by reading reviews, asking the manufacturer for samples, or purchasing an item yourself to evaluate it. Once you start selling, keep an eye on your product reviews to pick up any concerns clients might be reporting.

As far as profitability you want to consider potential profit margins. Ensure that the supplier offers products that align with your business and aim for a profit margin of at least 15%


Look for a supplier that is reputable and experienced, read reviews, call customer service to ask questions, and evaluate their response time. You can also order a few products just to test them and evaluate if they satisfy what you’re looking for.

Return Policy

Stick to suppliers that offer a return policy so that you can manage exchanges or returns which is key to customer satisfaction nowadays.

Building an Online Store

Here are some key aspects to keep in mind when building your ecommerce online store:

E-commerce Platforms

There are many e-commerce platforms out there with user-friendliness in mind. Platforms such as Shopify are specifically focused on e-commerce and come with many additional tools that can help you boost your online store. 

Do your research and consider your business budget, and the level of technical knowledge required so that you can evaluate if you’ll need to hire a developer, for example, and look at examples of other stores built under that platform.

Hosting and Domain

Register a domain name that is unique, and memorable, then get a secure hosting that complies with all the safety measures required for handling online payments and transactions. 

Make sure your hosting provider offers reliable customer support. Look into renowned hosting companies such as Godaddy who also offer additional services to optimize your online store.

Payment Processing

You will need to set up payment processing options. This can often be done through your selected ecommerce platform, or there are many third-party service options out there as well. This step is essential as it allows customers to securely pay for their items. 

Listings for products and Shipping

You will need to have your product listings along with images, pricing, and a detailed description. You can also add shipping details or calculators depending on the carrier used.

Customer Service and Support

Create and publish your return, refund, and exchange policies and establish a system to handle them. Make sure you also have a customer service option and other basic policies such as terms and conditions both for your products and for your website usage, and a privacy policy.

what is dropshipping business

The initial hassle of setting up a dropshipping business will be mainly focusing on the research, testing, and trial and error process of finding a reliable supplier and the technicalities of building and publishing the online store. 

However, once everything is set up, it becomes a very smooth process that requires minimum management and supervision.

Your Dropshipping Partner

In EP Logistics, we understand that it is crucial to have both a reliable partner and reliable logistics services for your dropshipping business. 

That’s why focus on providing you and your business with efficient warehousing and order-processing solutions tailored to your specific business needs. We offer you the following:

Secure and Organized Warehousing Services

We have top, secure warehouses strategically located in different cities for your convenience. We also offer advanced inventory management systems and specialized warehousing options such as climate-controlled units. Our warehouses can handle a wide range of products and different shipment sizes.

Order Processing 

We make sure that your order fulfillment is always fast and accurate. We know that orders must be accurate when a customer receives them, as well as the importance of them getting their items in excellent shape and timely manner. 

We offer automated systems that allow real-time inventory management as well as shipment tracking for both your and your customers’ convenience and peace of mind.

Advantages of Partnering with EP Logistics

We’re dedicated to helping you succeed and that’s why as your preferred drop shipping or logistics partner,  we pay attention to every detail in the fulfillment process to ensure it’s done properly; and efficiently and avoid errors or delays in your deliveries. 

These are some reasons why we’re perfect for your dropshipping needs:

  • Top Notch Customer Service: We have a dedicated customer service team that is prepared to handle any concerns. Also, our many years of expertise in the industry allow us to rapidly react to solve any issues that might arise.
    You can rest assured your operation is in good hands and that we’re here to help you resolve any doubt that you come across.
  • Optimized Efficiency: Our advanced warehousing and order processing systems guarantee that your orders are always fulfilled rapidly and accurately and that the number of errors and delays are reduced so that you can have peace of mind and focus on other core aspects of your business while we keep your customers happy with their orders.
  • Reliability: We have 20 years of experience backing us up as a top provider of reliable logistics services. We oversee, supervise, and audit our operations, ensuring that your products are delivered on time and in good condition to increase customer satisfaction and repeat clients.


At Ep Logistics, our main priority is to help you succeed with your online dropshipping business. We provide reliable services, including advanced processing and secure, organized warehousing, ensuring you receive the best dropshipping and logistics support available. Our excellence in logistics will give your business the competitive edge it needs, allowing you to focus on your online store and customers while we manage the logistics.

Reach out to one of our experts to learn more about how we can support your dropshipping goals. Request a quote today and experience the reassurance of working with a trustworthy provider.

Octavio Saavedra

Octavio Saavedra

Octavio Saavedra, a logistics professional with over 30 years of experience, is the founder and Managing Director of EP Logistics.