Dropshipping fulfillment lets ecommerce businesses handle orders without the costs or risks of storing inventory. It’s a simple way to sell products online while avoiding the headaches of managing stock and shipping.

But how does dropshipping fulfillment work? And how can you start dropshipping?? Read on for answers and a step-by-step guide.

What is Dropshipping Fulfillment?

Dropshipping fulfillment is a business model where a store doesn’t keep products in stock. Instead, when a customer places an order, the business outsources packaging and shipping to a third-party fulfillment service, which delivers the products directly to the customer.

This means the seller doesn’t handle inventory or manage the supply chain directly. Typically, the dropshipping supply chain involves three main players: manufacturers, dropshipping suppliers, and retailers.

Manufacturers

Manufacturers are the ones who create the products. Most don’t sell directly to retailers or consumers, instead selling in bulk to suppliers.

Buying directly from a manufacturer can be the most cost-effective way to source products, but it usually comes with minimum order requirements. You’d also need to store inventory and handle shipping to customers yourself. Because of this, many businesses find it easier to work with a dropshipping supplier instead.

Dropshipping Suppliers

A dropshipping supplier can be a manufacturer, a distributor, or a brand that has its products made by a manufacturer.

What sets a dropshipping supplier apart is that they own the products, manage the inventory, and handle shipping directly to the customer, allowing retailers to sell without holding stock.

Retailers

A retailer is any business or individual that sells products directly to consumers. If your business fulfills orders through a dropshipping supplier, you are acting as a retailer.

Dropshipping Fulfillment Benefits

Dropshipping fulfillment lets you offer a variety of products in your store without managing inventory or the supply chain. By partnering with a dropshipping supplier, you can quickly import products from their catalog into your store—often at no upfront cost.

Here are five key benefits of using dropshipping as your store’s fulfillment method:

1. Low Capital Requirements

With dropshipping fulfillment, you don’t need to buy products upfront. This makes it a cost-effective way to start an ecommerce store or expand your product range without tying up thousands of dollars in inventory.

2. Easy to Start

Dropshipping fulfillment eliminates the need to handle physical products yourself. Suppliers use their own fulfillment centers to pack and ship orders directly to your customers. Depending on your return policy, you won’t have to manage inventory or track stock levels. All you need to get started is a laptop.

3. Low Overheads

Since you don’t need to invest heavily in inventory, your operating costs remain low. Many dropshipping stores start as home-based businesses and can grow into larger, successful ventures over time.

4. More Scalable

Traditional retailers must handle every order manually—receiving, packing, and shipping—which can overwhelm a small team. With dropshipping fulfillment, suppliers take care of these tasks for you. This allows you to sell more products across multiple marketplaces or channels without slowing down.

5. Wide Variety of Products to Sell**

As a dropshipping retailer, you’re not limited by physical inventory. If your supplier adds a new product to their catalog, you can list it in your store instantly and at no extra cost, giving you the flexibility to expand your offerings quickly.

Common Dropshipping Challenges

Like any fulfillment method, dropshipping comes with its own set of pros and cons. Some businesses struggle to find reliable suppliers, while others face difficulties driving traffic to their store.

Here are the most common challenges that dropshipping stores encounter:

Low Profit Margins

Low profit margins are a common challenge in competitive dropshipping niches. Because it’s easy to start, many competitors sell products at very low prices, relying on high sales volume rather than quality. With minimal upfront investment, they can sustain smaller margins, making it harder for other retailers to compete.

Supplier Challenges

Even the best dropshipping suppliers can make mistakes when fulfilling orders—errors you’ll need to take responsibility for and address on behalf of your store. Low-quality fulfillment partners can cause problems like missing items, mishandled shipments, or poor packaging. Working with multiple suppliers, as many dropshippers do, can make order fulfillment even more complex.

To minimize issues, it’s crucial to partner with reliable dropshipping suppliers. You can connect with verified Shopify brands or vet options by checking reviews on platforms like DSers. Key factors to consider when choosing a supplier include:

Fair fees
Low order minimums
Fast, reliable shipping
Industry expertise
Responsive customer support

Finding a supplier that meets these criteria increases your chances of a smooth and successful dropshipping fulfillment experience.

Poor Unboxing Experience

For online businesses, shipping and fulfillment are the most direct touchpoints with customers. Since buyers can’t see or touch products before purchasing, the unboxing experience becomes a key opportunity to create a memorable impression and stand out from competitors. Many dropshippers struggle to make this experience engaging and consistent.

Shipping Issues

Long shipping times and delays are common challenges in dropshipping fulfillment. Depending on the destination, orders can take up to 60 days to arrive.

One way to reduce shipping costs and complexity is to ship from your home country. Some dropshippers also buy products wholesale and use a local fulfillment center in the target country, allowing them to deliver orders in days instead of months.

For dropshippers importing products into the US, using a tariff lookup tool can help identify the correct HS codes and applicable tariffs, helping avoid unexpected costs and delays.

Dropshipping Fulfillment in Action

Let’s imagine an online store called Phone Outlet, which sells phone accessories. Phone Outlet uses a dropshipping supplier named Wholesale Accessories for all its products.

Here’s how Phone Outlet would receive a dropshipping order and process it with Wholesale Accessories:

Customer Places Order with Phone Outlet

Mr. Allen needs a case for his new smartphone and places an order through Phone Outlet’s online store. Once the order is approved, several things happen:

Phone Outlet is notified of the new order via their ecommerce software. Depending on the platform, Mr. Allen also receives an email order confirmation.
Mr. Allen’s payment is captured during checkout and automatically deposited into Phone Outlet’s bank account.

Phone Outlet Places the Order with Its Supplier

Next, Phone Outlet forwards the order to a sales representative at Wholesale Accessories. The supplier bills Phone Outlet’s credit card on file for the wholesale price, including any shipping or processing fees.

Many dropshipping supplier apps support automated order forwarding or allow retailers to submit orders in batches, making this step faster and more efficient.

Wholesale Accessories Ships the Order

Once the item is in stock and Phone Outlet’s card is successfully charged, Wholesale Accessories packages and ships the order directly to the customer. Even though the shipment comes from the supplier, Phone Outlet’s name and address appear on the return label, and its logo is included on the invoice and packing slip.

After shipping, Wholesale Accessories sends Phone Outlet an invoice and tracking number.

The turnaround time for dropshipping orders is often quicker than expected. Many reliable suppliers can process and ship an order within hours, allowing merchants to offer same-day shipping even when using dropshipping fulfillment.

Phone Outlet Alerts the Customer of the Shipment

After receiving the tracking number, Phone Outlet sends the shipment details to the customer, usually through an email system integrated with the online store. With the order shipped, payment collected, and customer notified, the dropshipping fulfillment process is complete.

Phone Outlet’s profit (or loss) is simply the difference between what it charged Mr. Allen and what it paid Wholesale Accessories.

Handling Returns as a Dropshipper

Managing returns can be more complex when a dropshipping supplier is involved, as each supplier has different policies. Some may not accept returns at all, others may charge high restocking fees, and you might need to cover postage for defective items. Regardless, customers will reach out to you for returns, so it’s essential to make the process easy and transparent.

Here’s how the returns process typically works for dropshippers:

The customer requests a return.
You request an RMA (Return Merchandise Authorization) number from the supplier.
The customer mails the merchandise back to the supplier, including the RMA number.
The supplier refunds your account for the wholesale price of the merchandise.
You refund the customer for the full purchase price.

There’s no single “right” way to handle returns. Some ecommerce businesses offer returnless refunds, giving customers a full refund without requiring them to send back the item.

It’s a good practice to write out a clear return policy and display it on your website. This builds trust and encourages purchases. If you need help, tools like Shopify’s Return Policy Generator can help you create one quickly and easily.

Dropshipping Fulfillment FAQ

What’s the difference between a dropship order and a regular order?
The main difference is that in dropshipping, sellers don’t own or stock inventory. When a customer makes a purchase, a third party—such as a wholesaler or manufacturer—fulfills the order on the seller’s behalf.

What are the benefits of dropshipping fulfillment?

Low risk
Low capital requirements
Low overhead
Easy to start
Wide variety of products to sell

How do I process a dropship order?

A customer places an order on your online store.
Your store automatically forwards the order to a dropshipping supplier.
The supplier prepares and packages the customer’s order.
The supplier ships the order directly to the customer.

Dropshipping Fulfillment: Complete Guide to Efficient Order Management