Drop-shipping is a fulfillment method in which a retailer does not physically stock the items offered for sale. Instead, the retailer purchases items from a third party after they have been sold and has the third party ship them to the customer.
The drop-shipping business model is inexpensive to start, because it does not require thousands of dollars to invest in inventory as the merchant only purchases the items after they have already been sold. Additionally, running a drop-shipping business typically involves only low overhead expenses. However, profit margins can be slim in a drop-shipping business as this marketplace is normally very competitive.