Dropshipping is a method in which you do not keep the products in your inventory. Instead, you work with a supplier who sends the products directly to your buyers.
Your profit comes from the price difference between the payment you receive from the buyer and the amount you paid to your supplier.
- You sell cameras on eBay for $400
- A customer from USA (John) buys a camera from you
- You contact your supplier in the UK and provide him John’s shipping details.
- You pay your supplier $300 and he ships it to John.
- Your gross margin is $400–300=$100
Of course, $100 is not your net profit since you have to pay:
- eBay fees
- PayPal fees
- Take into account additional costs: utilities, bookkeeping, risk of fraud/return
It’s important to work with reliable dropshipping suppliers only. I’ve dedicated a full article to finding reliable suppliers and you’re welcome to read it here: