Key takeaways
- In dropshipping, your store takes the order and a supplier ships it. You don’t hold stock, but you are still the seller.
- The FTC says the seller who takes the order is responsible for shipping delays, even when a drop shipper does the shipping.
- Profit isn’t guaranteed. Margins depend on supplier prices, advertising costs, returns and fees.
- Be wary of courses or “done-for-you” stores that promise income.
This article is general information, not legal, tax or financial advice. Nobody can promise sales or profit.
What is dropshipping?
Dropshipping is a way of selling products without keeping them in stock. A customer orders from your store. You pass the order to a supplier, who ships the product straight to the customer. You earn the difference between what the customer paid and what you paid the supplier, minus your costs.
That means you don’t need to buy inventory in advance and you don’t pack or ship anything. It does not mean the business runs itself. You still handle marketing, customer questions, refunds and problems with the product.
The basic steps
- Choose a product area you understand. You’ll answer customer questions about it, so pick something you know. Look at demand and at how much competition there is. Free tools such as Google Trends can show interest over time, but they don’t predict sales.
- Find suppliers. Compare shipping times, product quality, return terms, communication and reviews. Order samples before you sell anything.
- Choose a store platform. Options include hosted store builders and WordPress with a shop plugin. Compare fees, including monthly plans and payment processing charges.
- Set up the store. That means a domain name, clear product pages with honest descriptions and photos, shipping times, and written return and refund policies.
- Set up payments with a mainstream payment processor.
- Get customers. Common routes are search (SEO), email, social media and paid ads. Paid ads cost money before they bring in sales, and costs can be higher than expected.
- Handle orders and support. Pass each order to the supplier, track it, and answer customers quickly.
- Review your numbers regularly: sales, costs, ad spend, refunds and what’s left over.
The main business models
- Standard dropshipping: you list a supplier’s products on your store. Shipping can be slow if the supplier is overseas.
- Print-on-demand: products with your design are made only after an order.
- Domestic suppliers: shipping is usually faster, but the product cost can be higher.
- Private label: your own brand on a product. This takes more money up front and more responsibility.
Where dropshippers get into trouble
Shipping delays. The FTC’s Mail, Internet, or Telephone Order Merchandise Rule applies to “most goods a customer orders from the seller by mail, telephone, fax, or on the Internet.” If you state a shipping time, you need a reasonable basis to meet it. If you state none, you must “have a reasonable basis for believing that you can ship within 30 days.” If you can’t ship on time, you must ask the customer to agree to the delay, and if they decline, or you can’t ship at all, you must refund the money. The FTC answers directly who is liable when a drop shipper causes a delay: “The seller is.” The person who takes the order, not the fulfilment company, is the seller under the Rule. Choose suppliers whose shipping times you can trust, and state realistic times on your site.
Returns and quality. Some suppliers accept returns and others don’t. Write a clear return policy before launch, and check what your supplier will actually do.
Margins. Product cost, shipping, payment fees, ad spend, refunds and platform fees all come out of what customers pay. Work out your profit per order before you spend on ads.
Sales tax. Whether you must collect sales tax depends on your state and on where your customers are. The SBA’s guidance says tax rules depend on your location and business structure, and points you to your state’s Department of Revenue for your obligations. After the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax based on sales activity, with rules that vary by state. Check each state’s rules, and talk to a tax professional.
Income tax. The IRS says you must pay self-employment tax and file Schedule SE if your net self-employment earnings are $400 or more. Keep records of income and expenses.
Business registration and policies. Check what your state and city require to operate, and publish a privacy policy and terms on your store.
Advertising claims. Describe products honestly. If you use affiliates or influencers, the FTC expects a clear disclosure of any paid relationship.
Beware of income promises
Many “dropshipping courses” and ready-made stores promise easy profits. The FTC’s Business Opportunity Rule requires sellers of business opportunities to back up earnings claims, and the FTC has brought cases over online-store schemes that promised income they didn’t deliver. Dropshipping itself isn’t illegal or a scam, but promises of “passive income” or “set up in a day” should make you cautious. Before paying anyone, ask for earnings claims in writing and search for complaints.
Is it right for you?
It may suit you if:
- You have limited money to start, and you can afford to lose what you spend on testing.
- You’re willing to learn marketing and handle customers.
It may not suit you if:
- You expect quick or easy profit.
- You don’t want to deal with refunds and complaints.
- You need full control over product quality and delivery.
Frequently asked questions
How much does it cost to start? It depends on your platform, domain, ads and samples. Add up all the costs, including monthly fees and ad testing, before you begin.
Is dropshipping still profitable? Some sellers make money and many don’t. Profit depends on your product, prices, ad costs and service. There’s no reliable average.
Do I need a business license? It depends on where you live and what you sell. Check with your state and local government.
Who is responsible if the supplier ships late? You are, as the seller. The FTC says so directly.
Information checked on: October 30, 2026. Rules change, so confirm with the official sources below.
Sources
- FTC, Business Guide to the FTC’s Mail, Internet, or Telephone Order Merchandise Rule (edited January 2025)
- SBA, Pay taxes
- IRS, Self-employment tax (updated June 2026)
- FTC, Disclosures 101 for Social Media Influencers (November 2019)