Dropshipping

Dropshipping has transformed retail by lowering the barrier to entry. A traditional retailer must invest in inventory before making a single sale: purchasing stock, renting warehouse space, and accepting the risk that products will not sell. Dropshipping eliminates these upfront costs. You list products, collect customer orders and payments, and pass the orders to suppliers who handle fulfillment. Your working capital is not tied up in inventory. The trade-offs are significant, however. Margins in dropshipping are typically lower because the supplier captures most of the value chain. You have limited control over product quality, packaging, and shipping speed since those are handled by the supplier. If the supplier makes an error or ships late, the customer blames you. Inventory visibility is also challenging: you may list a product as available only to learn the supplier is out of stock after the customer has already paid. Successful dropshipping businesses differentiate through curation, marketing, and customer service rather than product manufacturing. They build brands, create compelling product descriptions and photography, and handle customer communication and returns. Some use dropshipping to test new product categories before committing to holding inventory. In an ERP context, dropshipping requires specific workflow support. The system must route certain orders directly to supplier fulfillment rather than to the internal warehouse. Purchase orders and sales orders link together so tracking information flows from supplier to customer. Financial records must reflect the net margin rather than a simple buy-sell transaction.