As an e-commerce store owner, you have 2 basic options for sourcing products:

a) Pre-buy a large stock of inventory, store it in a warehouse (or your garage), and then manually package and ship products as they are ordered; or
b) Find a dropship supplier who will ship products directly to your customers as they are ordered.

We strongly recommend using the dropship model (option #2). To be fair, both options have their own set of pros and cons. But based on years of experience, we feel that the pros of the dropship model far outweigh the cons and that using a dropshipper is far superior to stocking inventory yourself.

The dropship model is very simple, as the diagram below illustrates. There are 3 basic parts to the process:

1. A customer places an order on your website and pays you the full retail price of the product (i.e. $200)

2. You forward the order information to your dropship supplier, who charges you a lower wholesale price (i.e. $150)

3. Your supplier ships the product directly from their warehouse to your customer

Let's talk about some of the benefits of using a dropshipper for your e-commerce store. First of all, you don't need to make any up-front inventory purchase, which can sometimes cost several thousand dollars. With the dropship model, you don't pay a penny to your supplier until after you've collected revenue from your customer. Not only is this arrangement favorable for cash flow purposes, but it also ensures that you'll never be stuck with obsolete inventory nobody wants to buy that you already purchased.

Second, when you use the dropship model you don't need a warehouse or any equipment to handle inventory or process orders. You can literally run your e-commerce store with nothing more than your home computer. You skip out on paying rent, buying equipment, hiring staff to run the warehouse, and all kinds of other "overhead" costs. When you use a dropshipper, your monthly operating costs will be no more than $50-100 per month.

Third, with the dropship model, you don't have to worry about order fulfillment (i.e. processing and shipping orders). The supplier takes care of all of that. All you do is forward the order info on to the customer, and then pass the shipping tracking info on to the customer when you get it from the supplier.

Finally, the dropship model allows you to focus all your time and effort on getting visitors to your store and converting those visitors into paying customers. That's what will drive your success and build your bank account. All too often, store owners who decide to warehouse and ship products themselves spend the vast majority of their time doing just that... instead of spending their time increasing traffic and bolstering their conversion rate (more on all this later).