Dropshipping is a way of running an online store where you don't keep the products you sell. When a customer orders, you pass the order to a supplier, and the supplier ships it straight to the customer. You never handle the stock. You make money on the difference between your selling price and what the supplier charges you.
That's the short answer. Below is how a dropshipping order actually flows, what it costs, where the money is made (and lost), and how to decide whether it suits your business.
How does dropshipping work? The order flow step by step
- A customer buys from your store. They pay your retail price, say €40, plus shipping. To them, it's a normal purchase from your brand.
- You forward the order to your supplier. This happens automatically through an app or integration, or manually by email or a supplier portal.
- You pay the supplier the wholesale price, say €18 plus their shipping fee. Your card or account is charged when the order is placed.
- The supplier packs and ships the order directly to your customer, ideally in neutral packaging or with your branding.
- The supplier sends you the tracking number, and you pass it to the customer (again, usually automatically).
- You handle the customer relationship: questions, delays, returns and complaints. The supplier is invisible to the customer; you are the shop they bought from.
The key point: you are the retailer, not a middleman the customer can see. Legally and in the customer's eyes, you are responsible for the product, the delivery and the after-sales service, even though you never touched the parcel.
Dropshipping vs. traditional ecommerce
| Dropshipping | Holding your own stock | |
|---|---|---|
| Upfront investment in stock | None | You buy inventory before selling it |
| Storage and packing | Supplier does it | You (or a fulfilment partner) do it |
| Margin per order | Lower | Higher, especially when buying in bulk |
| Control over quality and delivery times | Limited | Full |
| Testing new products | Fast and cheap | Slower, costs money per test |
| Branding and packaging | Hard to customise | Fully yours |
Many stores end up with a hybrid model: they hold stock of their best sellers and dropship the long tail of products that sell occasionally.
Pros of dropshipping
- Low starting cost. You don't tie up cash in stock that may not sell.
- Wide catalogue from day one. You can list hundreds of products without a warehouse.
- Easy product testing. Add a product, run some traffic to it, and drop it if it doesn't sell.
- Location-independent. The business can be run from anywhere with an internet connection.
Cons of dropshipping (the part most guides skip)
- Thin margins. After the supplier's price, shipping, payment fees, advertising and returns, many products leave very little profit. Price competition is fierce because other stores often sell the exact same item.
- You don't control quality or delivery. A supplier's mistake becomes your bad review.
- Long or unpredictable delivery times, especially with suppliers shipping from outside your customers' region.
- Returns are messy. Customers return to you, but the supplier may not accept returns, or may require the item to be sent back overseas.
- Stock sync problems. If the supplier runs out and your store doesn't know, you sell products you can't deliver.
- Customer service is all on you, often with less information than you'd like about where a parcel is.
How much does it cost to start dropshipping?
There is no stock to buy, but a serious store still has running costs:
- The store itself: a platform subscription or hosting, a domain, a theme and the apps or extensions that connect you to suppliers.
- Product samples: order what you sell before you sell it, to check quality and real delivery times.
- Marketing: usually the biggest cost. Most dropshipping stores rely on paid ads, and the cost per sale decides whether the business is viable.
- Payment fees, refunds and chargebacks.
- Taxes and compliance (see below).
Is dropshipping legal?
Yes. Dropshipping is a normal retail model and is legal. What gets stores into trouble is everything around it:
- Consumer law still applies to you. In the EU, for example, customers have a 14-day right of withdrawal on most online purchases, and as the seller you are responsible for honouring it, whatever your supplier's policy says.
- VAT and import duties. Since July 2021, goods imported into the EU no longer get the small-value VAT exemption. If you dropship from outside the EU, check how VAT is collected (for example through the EU's Import One-Stop Shop for consignments up to €150) so customers aren't surprised by charges at delivery.
- Product safety and labelling. You are the one putting the product on the market, so CE marks, labelling and safety rules matter.
- Trademarks and copies. Selling counterfeit or look-alike branded products is the fastest way to lose your store, your payment account and your ad accounts.
How to start a dropshipping store: a practical checklist
- Pick a niche you can explain in one sentence and products you'd be comfortable supporting.
- Find suppliers close to your customers where possible. Faster delivery means fewer complaints and refunds.
- Order samples and time the delivery yourself.
- Do the margin maths per product: selling price minus supplier price, shipping, payment fees, an allowance for returns and your expected ad cost per sale.
- Choose your platform and make sure it can sync stock and send orders to your supplier automatically.
- Write your own product content. Copying the supplier's description and photos makes your store look like every other one selling the same item, and gives search engines no reason to rank you.
- Publish clear shipping, returns and contact information before your first sale.
- Start small, measure, and cut products that don't make money.
Dropshipping on Magento (Adobe Commerce)
Shopify is the platform most beginners start with. Magento becomes the better fit when a dropshipping business grows up: large catalogues, several suppliers, B2B customers, multiple languages or stores, or a mix of dropshipped and stocked products.
- Multi-supplier catalogues: Magento handles very large product catalogues and complex attributes well.
- Stock sync: supplier feeds can be imported on a schedule through extensions or a custom integration, so stock levels and prices stay current.
- Order routing: orders can be split and sent to different suppliers automatically, while customers still see one order.
- Multi-store and multi-language: one installation can run several storefronts for different countries.
The trade-off is that Magento needs proper hosting and technical upkeep. That's exactly what we do at ShopWhizzy: fast, managed Magento hosting and development for stores that have outgrown the basics.
Frequently asked questions
What does dropshipping mean in simple terms?
You sell products online that you don't own or store. When someone buys, a supplier ships the product directly to them, and you keep the difference between your price and the supplier's price.
Is dropshipping still profitable in 2026?
It can be, but not by default. Profitable dropshipping stores usually have a clear niche, reliable suppliers with reasonable delivery times, their own product content and branding, and tight control of advertising costs. Stores selling the same generic products as everyone else, with slow shipping, tend to compete on price until there's no margin left.
Do I need a company to start dropshipping?
Requirements depend on your country. In most places you need to be registered for business and tax purposes once you start selling regularly. Check with a local accountant before your first sale, especially about VAT.
Who handles returns in dropshipping?
You do, from the customer's point of view. Agree a returns process with each supplier in advance, and be ready to refund customers even if the supplier doesn't refund you.
What's the difference between dropshipping and print on demand?
Print on demand is a type of dropshipping where the supplier prints your design on a blank product (a T-shirt, a mug) only after it's ordered. The order flow is the same; the product is unique to your store.
Thinking of building a dropshipping store?
If you're planning a store with a large catalogue, several suppliers or multiple countries, talk to ShopWhizzy. We build and host Magento stores that can handle it.