Traditional retail requires you to spend thousands of dollars buying inventory upfront before you can even launch a shop. You hold your breath and hope customers actually buy those items so you do not lose your investment. Dropshipping is a business model that flips this traditional method completely on its head by removing the need to buy stock in advance.

With dropshipping, you display pictures of products on your online store, but you do not actually own those items yet. The products sit safely inside a supplier's warehouse, which is often located in a different country. When a customer visits your website and buys a product for one hundred dollars, you immediately turn around and buy that exact item from your supplier for sixty dollars.

You pocket the forty-dollar difference as your profit. Next, you give the supplier your customer's shipping address. The supplier packs the item and ships it directly to the person who bought it from you. Your customer believes the package came straight from your business. You never see, touch, or ship the product yourself. It allows entrepreneurs to start testing new product ideas with almost zero financial risk.