# What is Dropshipping?

What is Dropshipping? Selling without holding inventory — a supplier ships directly to the customer. Low margin (5-20%), no quality control.

## How it works in practice

Dropshipping is great for validating a product. It's risky as a long-term model due to low margins and competition.

## Related metrics

- 3PL — an alternative with more control
- Private Label — the next step
- Lead Time — longer in dropshipping
- Gross Margin — low margin

## Common misconception

'Dropshipping is a passive business.' Managing campaigns, customer service, and supplier tracking are all intensive work.

## How to fix it

Not profitable? (1) calculate true margin including advertising, fees, and returns, (2) shipping times — 25 days means customers don't return, (3) consider private label.

## Real-world example

An entrepreneur: $22 sale, $12.50 supplier cost, $7 advertising, $1.50 platform fee = $1 profit. After returns, a net loss.

## Where to start

Use dropshipping to validate a product for 3-6 months. Once proven, move to private label.

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Category: Operations · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/dropshipping