On: June 8, 2021
By: Abhishek Dey

How Does the Dropshipping Business Model Work?

There are three key players in the dropshipping business model: the manufacturer, the retailer (you) and the customer.

The manufacturer’s role in a dropshipping business model includes creating products, carrying inventory, shipping products to customers on behalf of the retailer, replacing defective products, and restocking them. They sell products to the retailer at wholesale prices assuming the risk of unsold inventory.

In the dropshipping business model, the retailer (you), sell the manufacturer’s products on your website under your own brand. You’ll be responsible for choosing and marketing those products. Plus, you’ll also be responsible for their shipping costs and setting prices that make you a profit.

Lastly, in the dropshipping business model, the customer buys the products directly from you, the retailer. If questions or issues arise, they contact the retailer they bought the product from.

How Profitable is Dropshipping?

That’s a dropshipping FAQ we hear quite often. Dropshipping can be the most profitable business model of all, as you are not responsible for the costs of shipping and manufacturing. Because of this profits can quickly be reaped once you have found the right suppliers with Oberlo. You can calculate your profit to ensure you are on the right track to success with our dedicated Profit Margin Tool.