How Does Drop Shipping Work?

Choose a Company

First, you choose a company or companies that will provide the products you wish to sell. There are two basic ways to go about doing this--either work directly with a wholesaling company, or sign up with a company that provides you with access to several wholesale companies at once. Generally speaking, getting your products directly from a company can be more profitable because you may not have to pay any membership fees. On the other hand, working through an inventory company can be much more convenient, since you won't have to search for wholesale companies on your own.

List Your Products

Once you have signed up with a company and you know what products you would like to sell, you list them on your website or auction site. The company that provides the products often give you the pictures and product descriptions that they want you to use on your site. They also give you a minimum listing price, meaning that you cannot try to sell the item for less than the set price. The reason for this is to keep people from pricing things so low that there is no competition. You are usually free to charge as much as like over and above that limit.

Place an Order

When a customer decides to buy something, he pays you directly. You then place the order with your company and pay the asking price. Obviously, you keep the difference between the companies selling price and the price you sold the item for, which is how you make a profit.

Follow-up With the Customer

The wholesale company will ship the order directly to the customer. You will never have to keep inventory on-hand or ship products yourself. You should contact your customer at some point after the transaction to ensure that they received their purchases and were satisfied.