Dropshipping Fundamentals 2

Question 1

In a dropshipping model, who is responsible for storing inventory and shipping products to the customer?

Accepted Answer

The supplier

Answer

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?

Accepted Answer

Low upfront inventory investment

Answer

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?

Accepted Answer

Profit margin

Answer

Profit margin is the spread between your selling price and your supplier cost.

Question 4

Which of these is a common disadvantage of dropshipping?

Accepted Answer

Low profit margins due to competition

Answer

Because barriers to entry are low, competition drives margins down.

Question 5

What does 'order fulfillment' refer to in dropshipping?

Accepted Answer

Processing and shipping a customer's order

Answer

Order fulfillment is the process of getting the ordered product to the customer.

Dropshipping Practice Test