Online shopping on a tablet.

What’s dropshipping, and how does it work?

Curious about the e-commerce trend that lets you send products straight from the supplier to the customer, without having to store inventory? Here’s what you should know.

6 min read

Dropshipping is an online retail business model in which the products are delivered directly from the supplier to the customer, without the goods ever being kept in stock by a third party. So, when a customer purchases one of the products in the dropshipper’s store, the dropshipper orders the product from the supplier and ships it directly to the customer. This cuts out the middleman and many other obstacles that merchants face during the sales process. 

From the customer’s standpoint, there’s no major difference from buying a product from a dropshipper versus from a traditional merchant. Customers simply place an order for whatever they want and wait for it to arrive at their home. The only difference is, their chosen goods come directly from the manufacturer without ever physically passing through the hands of the merchant.

Dropshipping has become a convenient way to generate revenue and grow a sales business quickly. But what does dropshipping really entail? Initially, dropshipping sounds simple enough. And while there are a lot of perks, like all businesses, it has plenty of complications. Continue reading for the most important things to keep in mind if you’re planning on starting a dropshipping business in Spain.

Perks of selling with dropshipping

  • Starting your dropshipping business is easy. You’ll only need a small initial investment, which makes it a good idea for those who want to try out a new business model without shelling out too much money up front.
  • You can do it from home. Since you don’t need space to store inventory, you don’t have to worry about setting up a storage site.
  • It’s flexible. You get to choose which dropshipping supplier(s) you want to use for your online store. You are your own boss—you decide what the prices of the products are, and the profit margin for each sale.
  • You can experience rapid growth. If you see that sales start to grow fairly quickly and you can’t keep up with everything yourself, you can always delegate some tasks to friends, acquaintances, or even online virtual assistants.

Disadvantages of selling with dropshipping

  • Profit margins can be low. Your profit margin will depend on what kind of products you want to sell. You also need to take into account the prices set by your competitors and establish a price that is in line with the market, but will still allow you to generate a profit.
  • Issues with processing orders. If you sell products from different suppliers, you will have to tackle the difficulties of dealing with several manufacturers. This can get complicated when you start dealing with large numbers of orders.
  • Challenges with setting up customer service. You may experience problems beyond your control with some orders, since you have no direct access to the products that the customer receives. If an order is not delivered on time, if a product is defective, or if the customer receives the wrong product, you will be responsible for solving this problem for your customers—whether it was your fault or not.

Discover N26 Business Smart

The bank account for freelancers with 0.1% cashback, no hidden fees & a free Mastercard.
Learn about business banking
Smart Hero (ALL EU) Text/Media Intro.

How can I find dropshipping suppliers?

Nowadays, you can find plenty of online platforms with different dropshipping providers that work with sellers in Spain. Make sure you do an in-depth search, compare different suppliers, and read reviews from other dropshippers who have collaborated with them in the past. Direct and smooth communication with the manufacturer will mark the beginning of a healthy business relationship for both parties. Be alert for scams and make sure to choose a provider you can trust.

How do I handle dropshipping returns?

Dropshipping businesses in Spain generally allow returns. It all depends on the supplier you work with. First of all, check the conditions that you have set with the supplier—for example, are there deadlines or other parameters in place for returning goods?

The process of returning a product typically works as follows:

  1. The customer requests a refund.
  2. You provide the necessary return instructions (these may vary depending on the shipping method and the supplier).
  3. The customer returns the order to the address you provided (the supplier’s address).
  4. Once the supplier receives the goods, you’ll get a refund for the product you purchased.
  5. The refund is complete once the amount paid by the customer is reimbursed. 

However, make sure you avoid unnecessary returns by providing accurate and complete information on your website. Remember to include important information on your dropshipping website, such as the return and refund policy (explain whether this is free or not), the deadline to return an item, the countries in which this service is available, which items cannot be exchanged, or whether you offer refunds without the need to return the item.

How can I compete with AliExpress or Amazon?

Dropshipping isn’t exactly a brand new concept. There are already plenty of online sales platforms that sell similar or even the same exact products as you. They have more visibility and a better reputation. Rather than trying to compete with them, instead think about how you can differentiate your dropshipping business from the competition.

The most important thing to keep in mind before getting started is to think carefully about the types of product you want to sell. Watches? T-shirts? Backpacks? There are tons of brands that already sell similar items, so you have to find a way to stand out. But how?

  • Create your own unique brand.
  • Offer an innovative product.
  • Spark a trend or create a new, must-have item.
  • Find a market niche.
  • Focus your advertising on digital platforms like social networks.
  • Try the product before selling it (ask the supplier for a sample product to verify the quality). 

Remember that the success of your business not only depends on the business model you choose, but also on what you choose to sell.

N26 Business bank account for your independent small business

If you’re looking to start your own business venture as a freelancer or simply want to try out a new online business model like dropshipping, N26 has the perfect bank account for you. You can choose between different accounts for freelancers—from the free N26 Business Standard or the more sophisticated N26 Business Smart, or the premium N26 Business You and N26 Business Metal plans. Get between 0.1% and 0.5% cashback on every card purchase, feel secure with extensive insurance, and organize your money for your next venture with Spaces sub-accounts. Whichever account you choose, sign up in just 8 minutes, directly from your smartphone.

Also, N26 is a collaborating entity with the Social Security, which means that you can pay your self-employed cuota (cuota de autónomo) directly from your account, as well as pay the Social Security contribution if you have someone hired.

Find similar stories

By N26

Love your bank

Related articles

These might also interest you
Person with cat on pink couch.

Solo, pal, or pet dates: Doing Valentine's Day, your way

Whatever your relationship status, here’s how to celebrate love in all its many forms this Valentine’s Day.

A group of friends sits on a bench outside.

How to start saving as a group

Saving for something new can be tough, but having a joint savings goal can increase motivation — and be more fun.

Joint account or N26 Shared Spaces? Comparing the options

Want to take the next step with a partner and manage your finances together? Read on to get a side-by-side-comparison of the options and features, so you can decide what’s best for you.