Glossary: Basics

Drop shipping

Drop shipping is a way of selling in which the seller does not hold stock: when a customer orders, the supplier ships the product directly to them. Wholesale buying is the alternative, in which the seller buys stock in bulk, holds it and ships it.

Reviewed by Hoa Nguyen, Senior Marketer. Last reviewed October 4, 2026
Last updated October 4, 2026

In detail

In drop shipping the seller lists a supplier's products, takes the order and the payment, and passes the order to the supplier, who packs and ships it under the seller's name. The seller never touches the goods and needs very little money to start. The price is a lower margin, because the supplier charges more per unit than a bulk buyer pays, and less control over stock, quality and delivery time.

Wholesale buying works the other way round. The seller buys in quantity at a lower unit price, often against a minimum order quantity, stores the goods and ships them to customers. The unit cost is lower and the seller controls packing, speed and returns, but money is tied up in stock and unsold items are the seller's risk.

The two models are not exclusive. Many stores use wholesale for the bestsellers they can forecast, and drop shipping for slower items or to test a product before they commit to a bulk order. Some wholesale suppliers also offer drop shipping to approved resellers, usually at a higher unit price than a bulk order.

When you compare them, check five things: the unit cost, the cash needed up front, the delivery time the customer sees, who handles returns, and who owns the customer relationship. A low margin only makes sense if the volume or the saved cost of stock covers it.

Example

A seller buys a lamp as a drop shipment for $18 and sells it at $30, earning $12 (40%). Buying 100 lamps wholesale at $12 each costs $1,200 up front but earns $18 per lamp (60%), before storage and shipping costs.