Dropshipping Fundamentals 2 — Questions and Answers
Question 1: In a dropshipping model, who is responsible for storing inventory and shipping products to the customer?
- The store owner
- The supplier (Correct answer)
- The customer
- The payment processor
Correct answer: The supplier
The supplier holds inventory and ships directly to the customer in dropshipping.
Question 2: What is the primary financial advantage of starting a dropshipping business?
- Guaranteed high margins
- Low upfront inventory investment (Correct answer)
- No marketing costs
- Free shipping always
Correct answer: Low upfront inventory investment
Dropshipping requires little to no upfront capital because you don't buy inventory in advance.
Question 3: What term describes the difference between the price you charge and the price your supplier charges you?
- Gross revenue
- Profit margin (Correct answer)
- Chargeback
- Conversion rate
Correct answer: Profit margin
Profit margin is the spread between your selling price and your supplier cost.
Question 4: Which of these is a common disadvantage of dropshipping?
- High startup costs
- Low profit margins due to competition (Correct answer)
- Mandatory warehouse leases
- Required manufacturing skills
Correct answer: Low profit margins due to competition
Because barriers to entry are low, competition drives margins down.
Question 5: What does 'order fulfillment' refer to in dropshipping?
- Writing product descriptions
- Processing and shipping a customer's order (Correct answer)
- Setting up the website
- Running ad campaigns
Correct answer: Processing and shipping a customer's order
Order fulfillment is the process of getting the ordered product to the customer.
Question 6: Why is supplier reliability critical in dropshipping?
- Suppliers set your retail prices
- You depend on them for product quality and shipping times (Correct answer)
- They handle your customer service emails
- They own your store domain
Correct answer: You depend on them for product quality and shipping times
Since suppliers ship directly, their reliability affects your customer satisfaction and reputation.
Question 7: Which platform is most commonly associated with building a dropshipping store?
- Shopify (Correct answer)
- QuickBooks
- Slack
- Zoom
Correct answer: Shopify
Shopify is a leading e-commerce platform widely used for dropshipping stores.
Dropshipping Fundamentals 2
In a dropshipping model, who is responsible for storing inventory and shipping products to the customer?