(844) 845-4219 » What is Drop Shipping and How Does it Work?

What is Drop Shipping and How Does it Work?



If you have stubborn debt and are looking for ways to boost your income, online side jobs can be tempting. One gig is dropshipping.

If you search the term on YouTube, the results will light up like a Christmas tree with experts claiming they can teach you how to replace your income by selling products online that you don’t actually own.[1]

Big-name retailers dropship all the time. But they’re not the only ones who can reap the profits of selling goods online – anyone with a laptop can.

It costs practically nothing to start, so you can do it in your spare time. If you’re just learning about drop shipping, don’t get lost in the idea of making quick cash. Just like any other business, there are risks and ethical dilemmas to face if you decide to start doing it yourself.

Read on to learn the basic methods these gurus teach, what investments are involved, and how to avoid scaring off potential customers by ripping them off. Of course, that is, if you feel drop shipping is a good fit for you.

And if it’s not, learn how to protect yourself from other sellers’ drop shipping scams…

What is drop shipping?

Who would buy cheesecake from Staples, a fire pit from Best Buy, or a jewelry box from Home Depot?

You might be – even though these retailers don’t really sell them.

These companies and many others are doing something called drop shipping, a sneaky way retailers can turn a profit selling you things they don’t actually carry.

Many retailers offer items online that are both unrelated to their brand and unavailable in their stores. Because they won’t sell much, they don’t stock them. But somebody will buy them, so they drop ship those products.

Not making sense yet? Watch this video to see a closer look of how it works…

Stores use drop shipping because they save on stocking and inventory costs. Is that helpful to you?

Maybe those savings get passed on to consumers but don’t count on it. And sometimes identical products get drop shipped by multiple retailers at different price points. Meaning, you can easily get ripped off.

Don’t let this confuse you. Just because something is dropshipped doesn’t mean you shouldn’t buy it. Just that you shouldn’t assume it’s the cheapest option.

Jaxon Nagel, a content analyst for e-commerce site, says drop shipping can actually make your online shopping experience better. [2]

He learned dropshipping techniques while working for, before making the switch to his current position.

“Dropshipping gives retailers the flexibility to focus their resources beyond inventory,” Nagel says. “It’s easier for them to offer better customer service and a wider breadth of products for the customer to choose from.”

How to start drop shipping:

There are a few viable (yet potentially ethically questionable) ways to get your foot in the drop shipping door.

Starting with (in’s opinion) the most ethical, and ending with the least, here are three ways to get started dropshipping.

1. Sell through suppliers who’ve approved you

Minimum work involved: $200-$300 investment in an eCommerce site and advertising, and quite a bit of time and effort

This is one ethical drop shipping method, and how the big guys like Staples, Sears, and Best Buy do it too.

In this scenario, the drop shipper approaches selling just like a traditional retailer would. They have a relationship with the people whose products they’re selling. This means you’re buying at wholesale prices your customers couldn’t get unless they become approved sellers, too.

How does a person on a laptop get approved to sell by wholesale suppliers?

Definitely not by listing their items on eBay. Individuals who actually get approved to sell other people’s products have built their own online stores, offer great customer service, create unique advertising, and are prepared to go through the formal negotiating process to become authorized retailers.

For all of this effort, dropshipping gurus like former cookie salesman Anton Kraly recommend selling expensive items, so you only have to make a few sales a month to cover advertising and pay the $30 fee that keeps your site running.[3]

Downsides to this method:

This method requires a lot of commitment, market research, and time. It could take months to be ready to make a sale if you’re also working a lot – and even then you have to offer great customer service on the sales you do make, or risk losing your suppliers.

How this can work for you:

Your digital marketing skills far outweigh your financial capacity and you’re willing to tackle things slowly over the long-term. Without pulling tens of thousands of dollars out of your butt to pay for inventory and retail space, this could be a way to start your own business.

2. Sell through suppliers who sell to anyone

Minimum work involved: Some time and effort, any level of investment in Facebook ads.

AliExpress is a site very similar to Amazon. It is made up of suppliers in China and elsewhere and will sell to anyone.[4]

Aliexpress drop shippers find low-cost passion products and use targeted Facebook advertising to reach customers with the same passions.

For example, You could list this $7 deer purse for $30 and spend $5 a day to reach hundreds of deer-lovers on Facebook[5] who talks about making $200 a day selling a wolf mug that cost $8 on AliExpress.

How? He marketed to Game Of Thrones fans on Facebook.

So why don’t people just shop on Aliexpress themselves then?

Because there are plenty of online shoppers who would prefer to buy from a beautifully designed website, or funny Facebook ad over an international sellers portal they are unfamiliar with.

Because of this, many Aliexpress suppliers encourage drop shippers marketing to customers in the U.S. to list their products and to even use their product images. Everything is considerably cheaper than similar products in U.S. stores, and there’s even an app that will import products directly from Aliexpress, mark them up, and fill orders automatically.

Downsides to this method:

Anyone who orders from Alibaba or Aliexpress has to deal with 2-4 week shipping times.

This makes for angry customers and chargebacks from credit card companies when customers think their product was lost. That’s a lot to deal with for low-profit margins, and there’s still something somewhat unethical about selling from a source your customer could access themselves.

How this can work for you:

If you don’t have a lot of time, but want to learn more about building a website or social media. This could be a way you can invest in yourself and not take attention away from your current job without paying or going back to school.

3. Sell through suppliers you have no contact with

Minimum work involved: A few hours of your time, and practically no upfront costs or investments.

I first became aware of individuals drop shipping through this method formally referred to as “retail arbitrage,” which is basically the same concept.

Drop Ship arbitrageurs find items on one publicly accessible website, mark them up, and list them on another.

For example, this cat toy sells for $22 on eBay[6] and it’s $15 on Amazon.[7] You rewrite the description, then list it yourself on eBay for $21 and corner that market.

If someone orders, you accept their money, use it to buy the toy on Amazon and change the shipping address to your eBay customer’s info instead of your own. Then pocket the $6 difference in price.

Seems easy enough. And you could earn $6 per sale without doing much.

Downsides to this method:

Low-profit margins, the original supplier ends up losing money on returns from sales they didn’t handle themselves, customers can get upset if their item arrives from a different seller than they ordered from, and your seller profile suffers when people realize you don’t have anything to do with your products. [8]

How it could work:

You’re trying to decide if you want to work online and don’t mind getting some bad reviews in the process. Without having to invest in anything, this could be a way to experiment with online selling to see if you like it.

Is drop shipping worth it?

If you aren’t interested in getting into drop shipping yourself, you should still learn how not to get scammed by the less ethical sellers.

Next time you see a camping chair online and think to yourself, “$85, that must be a really nice chair!” you should think again. Follow these steps to make sure you know what’s behind the listing …

  • See if you’re buying from the manufacturer: Check the store’s website or page to see if it’s a retailer or a manufacturer selling their product directly. If it’s the manufacturer, you probably won’t find it cheaper elsewhere unless it’s up for resale.
  • Google the exact product name: It seems obvious, but never skip this step. For example, a camping chair is listed at $85 dollars from a nice website, but after Googling it I found it for $25 on Amazon.
  • Pay attention to similar product images: Sometimes products that are drop shipped are private labeled, which means you will find the same exact product with a different brand name stamped on it. The two most likely still come from the same manufacturer, branded by different retailers. You can tell if the product images look the same.
  • Amazon isn’t always the cheapest: You should check, but don’t assume Amazon always wins. This $18 dress on Amazon[9] is $5 on Aliexpress.[10]
  • Check for cart discounts: Don’t be put off by the term “Add to Cart for Price.” Sometimes drop shippers will add discounts to your cart, but aren’t allowed to advertise the product below a certain price. If you see that phrase, the item might end up cheaper than the lowest list price you’ve seen. You can always remove the item from your cart after you look at the price.
  • It’s not all in the listed price: Some drop shippers list low prices on a product but gouge you on shipping and service fees. Some offer manufacturer warranties, others don’t. Some dropship stores donate profits to a cause, others only care about sales. If it’s obvious a product is drop shipped and listed by multiple stores, look for other benefits that can tip your decision in one store’s favor.

So there you have it. A look behind the curtain for just one of these make-money-online methods that you can potentially do without quitting your current job.

Please be careful with any of these methods though. There is nothing worse than investing in something you believe will solve your problems, then find out you wasted your time. The same goes for purchasing from one of these sellers. Use your gut – and your brain!



TrustScore 4.6


Contact us at (844) 845-4219

How Much Could You Save?

Just tell us how much you owe, in total, and we’ll estimate your new consolidated monthly payment.