What is dropshipping and how does it work?
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A standard business model is to buy a large order of a product from a company, and because it’s a large order (MOQ/minum order quantity), you get a break on the price, plus you pay no sales tax. This is the “wholesale” price.
You buy a hundred bicycles from China at $200 each ($20,000), and after they arrive, you sell them locally for $300 each. This is the retail price, and you profit $100 per bicycle.
Now suppose you decide you don’t want to pay the monthly rent on a bicycle shop, or pay a worker to stay in the shop plus assemble the new bikes.
Without that expense, you feel comfortable selling the $300 bikes for $250, and you would make a $50 profit on each one.
You arrange a deal where you buy 100 bikes from the factory in China and the Chinese factory will ship the individual bikes direct to your customers’ driveways in a crate, delivered by UPS/FedEx.
You tell them the address, and China ships each one individually.
The customer has to assemble it, but…they saved $50.
The Chinese factory “could” do this without you, but…they would have dozens of countries and different languages to understand. They prefer to have someone local in each country to manage a website in the local language, and to handle customer service.
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