Dropshipping

Dropshipping is a retail fulfillment method where an online store sells products without holding inventory, forwarding each order to a third-party supplier who ships it directly to the customer.

What is dropshipping?

Dropshipping lets an online store sell products without owning any stock, so the seller avoids buying, storing, and shipping inventory upfront. The seller earns the margin between the retail price the customer pays and the lower price the supplier charges. For the mechanics step by step, read our guide on how dropshipping works.

The seller stays responsible for sales, marketing, and customer service, while the supplier handles storage and shipping. According to Grand View Research, the global dropshipping market was valued at approximately $464 billion in 2025 and is projected to grow at roughly a 21% compound annual growth rate (CAGR) through 2033.

Key characteristics

  • No held inventory: The supplier keeps the stock, which shifts most ecommerce inventory management off the seller.
  • Order forwarding: When a customer buys, the seller passes the order details to the supplier, who picks, packs, and ships.
  • Low startup cost: No upfront inventory investment or warehouse is needed, which lowers the barrier to entry.
  • Margin-based earnings: Profit equals the difference between what the customer pays and the supplier’s price.
  • Less fulfillment control: Shipping speed and stock availability depend on the supplier, a common trade-off.

Example

Picture a small store that sells silicone phone grips through Shopify. When a shopper checks out, the order routes to the supplier, who packs and ships the grip directly to the buyer. The store never touches the product.

Related terms

FAQ

Is dropshipping the same as using a 3PL?

No. In dropshipping the supplier owns and ships the stock, while with a third-party logistics provider you own the inventory and pay the provider to store and ship it for you.

Do you need a warehouse to dropship?

You don’t. Because the supplier stores and ships every product, a dropshipping store runs without a warehouse or upfront inventory.

What is the main downside of dropshipping?

The main trade-off is reduced control, since shipping speed, stock levels, and product quality all depend on the supplier’s performance.

The Fishbowl Commerce Suite helps online sellers track inventory and orders across multiple sales channels in one system.