Business models
The dropshipping business model
The dropshipping business model: you sell products online, and a supplier ships them directly to the customer. You buy from the supplier only after a customer has paid, so you carry no stock.
How it makes money
You buy from the supplier only after a customer has paid, so you carry no stock. You keep the difference, but margins tend to be thin and most of the money goes on ads.
Real examples
- Shopify store owners can connect supplier apps that handle the shipping.
- Many stores use print-on-demand suppliers in the same way.
The numbers to watch
- Margin after product, shipping and ad costs
- Cost to win a customer
- Share of refunds and complaints
Who it fits
People who like testing products and ads, and are ready to handle customer service.
What goes wrong
Long shipping times, weak quality you never see, and the same products as everyone else. You are still responsible to the customer for what you sell.
Try it this week
Order the product yourself first. If you would not keep it, do not sell it.
Then give it a time: one block of 90 minutes this week, in your calendar. Our playbooks have the next steps for finding your first customers.
Questions
What is an example of the dropshipping model?
Shopify store owners can connect supplier apps that handle the shipping.
What is the biggest risk with the dropshipping model?
Long shipping times, weak quality you never see, and the same products as everyone else.
Plan your first week of building it
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