What is dropshipping? The ultimate guide (2024)

What’s dropshipping? This strategy is becoming more and more attractive for retailers all over the world. Find out more about how does it work and its advantages.

This distribution model, which frees the e-commerce owner from logistical burdens, is closely linked to online selling. So, before we delve deeper into what dropshipping is and how it can help an online store, let’s take a brief look at the history.

Dropshipping: what is it and how does it work?

In essence, dropshipping consists of the following: the end consumer buys a product in an online store and the dropshipping supplier sends the customer their order without going through a retailer, with no requirement to have stock or a warehouse in order to sell. Is a very goog shipping method.

So that there can be no doubt about what dropshipping is and how it works, let’s look at an example. We have prepared a case study of what dropshipping would be like with a self-owned e-commerce (although it is also very common to do dropshipping via marketplaces – more information on that later). 

1. Jorge wants to buy a fragrance online and have it sent to his home address. He Googles “Armani men’s cologne”, finds a dropshipping store called “Perfumería Amélie” and decides to buy it from there. He makes the payment and gives his shipping information.
2. Marta, owner of Perfumería Amélie, receives Jorge’s order. She is a BigBuy client and has contracted a Wholesale Pack, so she does not have to manage the shipping of the perfume. If your e-commerce is synchronised with BigBuy, the order will be shipped automatically. She will thus acquire the product at a reduced wholesale price.
3. Upon receiving the order, BigBuy prepares it, packages it and sends it directly to Jorge anonymously.
4. Jorge gets his perfume on time. In the package, he will find a delivery note featuring the name and logo of Perfumería Amélie, but nothing that refers to BigBuy. He leaves a positive review for Perfumería Amélie and recommends it to his girlfriend and her family for buying future fragrances.
5. Marta has a satisfied new customer and her financial profit is the difference between BigBuy’s wholesale price and the RRP at which she sold Jorge the cologne.

A typical example of dropshipping with Bigbuy.

And voila! Marta can focus on attracting traffic and optimising her store to sell as much as possible. She doesn’t have to worry about storing, preparing, or shipping the product.

Here is a good way to explainwhat it is and how to do dropshipping in general terms. Even so, we’ve compiled some of the most common questions that all beginner dropshippers have asked themselves at some point:

What do you need in order to do dropshipping? 

To do dropshipping you only need two things:

1. Have one of the dropshipping suppliers available.
2. To choose the sales platforms through which you are going to sell: your own e-commerce, marketplaces, social selling, etc. Of course, these channels must be synchronised with your supplier.

What’s the difference between dropshipping and affiliates? 

Many people confuse dropshipping with affiliation, and while both are viable business models with some common ground, they have quite a few differences. While dropshipping is shipping method and depends 100% on you (even though you don’t need physical stock or a warehouse), affiliate marketing consists of promoting third-party products or services in exchange for a commission.

Dropshipping and e-commerce in UK

The percentage of retail sales made online in the United Kingdom is estimated to increase to 30.6% by 2027. By 2027, the market is projected to reach a value of around $230 billion. These figures are according to data from eCommerce Insights and The Evergreen Agency.

Obviously, this fact has not gone unnoticed by those looking for business opportunities, who have hurried to create online stores to meet the new needs of their potential customers. With greater or lesser success, thousands of e-commerce stores have been opened, which have found their place in the day-to-day lives of their users.

And although one of the main benefits of a dropshipping store is the huge reduction in fixed costs (as you don’t have to pay rent for premises, or water or electricity rates) there is one common problem for offline and online entrepreneurs: stock. If you want to sell, you need to store your products in order to prepare them for shipment and send them to your customers. This can impact on the costs of your online store and reduce its advantages relative to a physical store. But don’t worry: this is where dropshipping comes in.

This is a good way to explain what dropshipping is and how it works in general terms. 

Pros and main advantages of dropshipping

Now we have explained what dropshipping is, we will briefly explain the main advantages of using dropshipping.

Low initial investment.

Of course, you save having to manage stock. But this was already made clear in the above paragraphs. In any case, this fact entails significant economic savings (reducing your risk of losses in case the business fails). By not having to manage stock, you won’t have to invest in storage or maintenance. This is the main attraction of dropshipping: it allows you to dedicate yourself to selling and generating maximum profit without worrying about logistical aspects.

Start your business easily and quickly

Starting your business is easier and faster than ever: it will only cost you what it costs to set up your dropshipping store. If, in addition, you outsource its creation, you can have your e-commerce ready in a much shorter time frame than you might expect. At BigBuy, for example, we develop your Dropshipping Store via a 360º turnkey solution, which is fully synchronised and offers a multitude of advanced tools to boost sales. 

No need for a physical warehouse

Not having to worry about storage and shipping leaves you plenty of time for what’s really important in an e-commerce: selling. By delegating work to a dropshipping wholesaler, you will be able to devote yourself to attracting as much traffic as possible to your store, and then encouraging them to buy the products you have so carefully placed at their disposal. You will be able to optimally allocate your resources – both financial and in terms of time – so that your e-commerce reaches its full potential.

Easy shipping management

Your supplier must become your global logistics operator, with everything that this implies. They must manage all the merchandise in stock, register the order, do the picking, prepare the package to be sent and coordinate with the respective courier companies for each area. At BigBuy, we also provide our distributors with all the information on the status of their orders on their control panel. They can track each one of them with their tracking number and receive post-sale support in case they have any questions about the delivery.

Wide range of products

Using a dropshipping wholesaler allows you to offer a very extensive catalogue of products, which could prove complex if working alone. In addition, it will be constantly updated, without you having to worry about it. At BigBuy we have thousands of items and are constantly looking for new products to expand our catalogue.

100% scalable business

Your business will be 100% scalable. In a traditional shop, scalability can be limited by simple things like the size of your premises. In order to grow, the owner would have to look for a new space, with all the costs that this entails (and we are not just talking about rent. Should they change areas, they would also have to launch an advertising campaign to publicise their new location, and that does not come for free).
And, although an e-commerce store that doesn’t use dropshipping is certainly more scalable than a physical one, the real difference is felt by the brand which uses dropshipping. This distribution model allows you to direct all the traffic you want to your store, without the risk of selling too much and not being able to manage everything. The dropshipping supplier will make sure that all your orders arrive on time and in your name.

Potential cons and risks of dropshipping

Despite the numerous advantages offered by the dropshipping business model, it’s important to recognize that it may also have certain limitations, drawbacks, or inconveniences, particularly depending on how you view your own business. Below, we outline some of these potential disadvantages, which, as mentioned, will depend on how you choose to run your business and in many cases may not pose an obstacle to achieving a successful online store.

Dependence on Your Supplier’s Inventory

Dependence on your supplier’s inventory. It is clear that product availability is limited to what dropshipping suppliers have in stock, so it is important to have one that has a wide catalog of products and stock.

Lower Control Over Product Quality

When you do dropshipping, unless you place a test order, the products are shipped directly to the final customer, so you don’t have the ability to inspect each product before it reaches its destination. To ensure this doesn’t affect customer satisfaction, it’s essential to work with a full-service supplier like BigBuy, which complies with European guarantees and certifications. Additionally, if this supplier works with top brands, you can set this concern aside, knowing from the start that the products offered in your dropshipping store are of high quality.

Lower Profit Margins

Since you have to pay your supplier for each item sold, profit margins may be lower compared to selling your own products. This is not a problem specific to dropshipping, as any online store can sell products not manufactured by them, but purchased from a supplier. To counteract this disadvantage, it’s important to implement a smart pricing strategy, where you seek products with higher profit margins. For this, it’s crucial to work with suppliers with a broad product catalog like BigBuy, where hundreds of thousands of references are at your disposal.

Order Delivery Issues

One of the most common disadvantages associated with dropshipping is potential shipping issues. There may be delays or errors that are beyond your control and could affect the customer experience. This problem is often encountered when dropshipping from China, as you generally don’t have control over the shipping companies used, and you don’t have access to shipment tracking. With a supplier with European stock like BigBuy, you can monitor the customer’s order at all times and trust that the best shipping companies will be used for your orders, as we work with over 50 throughout Europe.

 Best selling dropshipping products

If you are just starting out in dropshipping, it is normal to worry about what products to sell, the market trends and opportunities, etc. The best thing is to begin with a market study of possible niches and trending products and attempt to find a balance between both. If you don’t know where to start, here’s how to pick a niche to get started with dropshipping.

To give you an idea, some relevant niches in dropshipping today are: 

• Technology
• Home
• Beauty and Health
• Sports
• Pets
• Sex Shop

But, beyond the products you sell, you should also take care when it comes to choosing a trusted dropshipping supplier. Ultimately, you will be placing responsibility for some of the most important aspects of your business in their hands: variety available in the catalogue, product quality and shipment fulfilment. Don’t forget that all this has a direct impact on the reputation of your brand – which you are the face of! 

Key tips for selecting a dropshipping supplier

As we discussed, the choice of dropshipping supplier will largely determine the success of your store. In the end, delegating so many things to them is convenient, but it also carries a lot of responsibility. Fortunately, there are many companies, such as BigBuy, that have plenty of experience and that can offer you a very good service. 

But in order to find them, we offer several tips:

• Find dropshipping suppliers who are not middlemen! One that distributes their own stock. BigBuy is a dropshipper with 20,000 m² of logistics warehouses, from which we distribute thousands of items. It will always be more profitable to work directly with the wholesaler, since intermediaries will only end up redirecting you to a wholesale company like us when they don’t have an item in stock. BigBuy is a B2B business leader and online and offline wholesale specialist. Our sales volume allows us to buy directly from manufacturers and save on costs related to intermediaries. Ultimately, this results in a better experience for our customers, who can purchase our items at especially competitive prices.
• Excellent Customer Service. Beyond their catalogue, delivery conditions, and so on, it is essential that your supplier has a good after-sales support team, so that you can rest assured that you will be able to quickly resolve any problems that may arise.
• Good shipment management. Most importantly, since we are talking about a dropshipping business, it is important to ensure your supplier makes the shipment anonymously. The speed of delivery is also important, as online consumers increasingly expect a fast delivery service, which is why it is so important that your supplier can guarantee this. Another factor to take into account is an order tracking facility, as this will enable you to respond confidently to your customers if they need to know where their order is. 
• Technological synchronisation solutions. Check what simple and technological synchronisation options your supplier offers, beyond a CSV file. 
• Stock in Europe. If your supplier has the stock located in Europe you can save yourself all the problems associated with dropshipping via Chinese suppliers – delivery time frames of more than 20 days, lacking in guarantees or quality certifications, etc. 

Where to sell with dropshipping

This is another major decision when starting out in dropshipping. For dropshipping, you have two main options: doing it on your own online store or through marketplaces like Amazon or eBay, among others.

Dropshipping on Ecommerce Platforms

When we hear about dropshipping, we always think of an online store, and indeed, one of the most popular options when starting with this business model is to do dropshipping on ecommerce platforms.

Having your own dropshipping store has its advantages:

• Control over your brand
• Flexibility in setting prices
• Less direct competition
• Access to customer data
• Control over return policies

But it’s true that the digital environment is constantly changing, making it no longer necessary to have an online store to sell on the Internet.

Dropshipping on Marketplaces

Marketplaces play a crucial role in British e-commerce, with Amazon being the preferred platform for consumers, as 90% of them choose Amazon as their first option for online shopping. According to ICEX.

Here are some advantages of doing dropshipping on marketplaces:

• Greater initial visibility
• Existing infrastructure
• Less marketing effort
• Easy to start selling
• Site reputation and trust

With BigBuy, you can sync the catalog with all ecommerce software, as well as with major marketplaces like Amazon, eBay, Fnac, Rakuten, Cdiscount, Carrefour, etc.

Is dropshipping worth it?

In this article, we have discussed what it is,how to do dropshipping and the advantages it brings to those who decide to sell over the Internet. Now that you know the most important things about this business model, let’s review if dropshipping is worth it:

• The dropshipping supplier you choose will be the cornerstone of your customer satisfaction levels. Make sure you work with a trusted and experienced supplier that offers you as much potential for expansion as possible, even to countries where different languages are spoken.
• One basic requirement is to have some knowledge of online marketing. Although working with a dropshipping supplier frees an e-commerce owner from many tasks, it still leaves them the most important part, which is selling. They are in charge of developing a good social media strategy, managing their AdWords campaigns and, essentially, being aware of the latest trends in online marketing and putting them into practice in their store.
  If the distributor has no knowledge of how to run a digital business, their e-commerce will not function as well as they hope. That is why we advise our distributors to study online marketing and not to believe any “gurus” who promise that simply by having a presence on the Internet you are guaranteed to make any income. An online business requires less investment than a physical one, and is more easily scalable, but both require a great deal of effort and hours of work in order to make them profitable.
• Although, as in all things, you will need to make an initial investment, dropshipping provides many advantages when it comes to launching an e-commerce without spending too much money. Remember that it will always be easier for you to position yourself in a specific and well-targeted market niche, and that, the more traffic you generate, the more chance you have of making a sale. Dedicate a portion of your budget to advertising, keeping analysing the market, optimise your approach, and you will sell more and better.

We hope our article on dropshipping has proved useful. BigBuy is a leading dropshipping supplier in Europe. We hold over 400,000 items of all types, including top brands. From our 30,000m² warehouse, we serve customers from all over Europe. We invite you to get to know us and take your next step in dropshipping. 

Frequently Asked Questions About Dropshipping

Who pays for dropshipping shipping?

The shipping costs will be charged to you by the supplier. To pass them on to your online store you can choose between different strategies: charge the shipping costs directly to your customer, increase the price of the products and offer free shipping (this is a very common option); subtract them from your profit margin, etc.

Do I need a vat number for dropshipping?