Dropshipping A New Start Up

Business Model

Table of Contents
Summary 1
Background 1
Introduction 2
Problem Statement 3
Significance of research 4
Objectives of the research 4
Research Questions 4
Relevance of research 5
Research Gap 5
Literature review 6
Research Methodology 7
Feasibility Study 7
Exploratory Research 8
Descriptive Research 8
Market Research and Niche Selection 9
Supplier Sourcing and Partnerships 9
Website Development 9
Marketing and Customer Acquisition 9
Customer Service and Retention 10
Scaling Operations 10
Resource Requirements 10
Financial 10
Initial investment 10
Ongoing costs 10
Human Resources 10
Core team 10
Freelancers 11
Tools and Technology 11
E-commerce platform 11
Marketing tools 11
Analytics 11
Automation tools 11
Risk Management 11
Supplier reliability 11
Shipping delays 11
Competition 11
Legal compliance 11
Tools used for the research 12
Business Timeline 12
Exploration and Progression 12
Preparation and Carryout 12
Beginning and Running 12
Project Time Line 12
Month 1: Research and Preparation 12
Month 2: Build the Online Store 13
Month 3: Branding and Marketing Foundation 13
Month 4: Launch and Initial Marketing Push 14
Month 5: Growth and Optimization 14
Month 6: Scaling and Long-Term Strategy 14
Ongoing Tasks (Throughout All 6 Months) 15
References 15
Summary

From the point of view of an online retailer, the objective of this project is to
investigate the possible scalability of the dropshipping start-up business model, as
well as the merits and drawbacks of this business model. The purpose of this project is
to investigate the expansion of the dropshipping start-up business model in the e-
commerce industry. It will provide information on the size and development of the
market, as well as investigate the merits and downsides of this business model. Within
the context of this project, the theoretical framework investigates the advantages and
drawbacks that were chosen by the author of the business model from the point of
view of the retailer. In addition to this, it will discuss the advantages of dropshipping
from the point of view of the supplier, as well as partly summarize the results of
previous authors' research on dropshipping start-ups and investigate the ethical issues
that are associated with using dropshipping start-ups.

Background

The advent of the digital economy has brought about a shift in the way companies
function, making it easier for people with minimal cash to engage in entrepreneurial
endeavors. The concept of dropshipping, which is used for retail fulfillment, has
become one of the most popular trends in the market for online shopping(Navarro,
2021). Within the framework of this model, business owners take on the role of
mediators between consumers and suppliers, selling things remotely without
maintaining inventories. Because the supplier sends items directly to clients, company
owners are free to concentrate on marketing and maintaining positive relationships
with their clientele.The idea of dropshipping has its origins in more conventional
supply chain models; nevertheless, it has acquired major support in the 21st century as
a result of the proliferation of e-commerce platforms like as Shopify and
WooCommerce, as well as marketplaces such as Amazon and eBay(Sleeth, 2023).
The business model was first embraced by entrepreneurs operating on a smaller scale.
However, as technology developments improved supply chain operations, inventory
management, and international commerce, the model also grew. Success in the ever-
changing e-commerce landscape is fueled by efficiency and adaptability. New

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businesses no longer have to deal with the usual hurdles to entry, such large initial
expenditures in inventory or warehouse facilities, thanks to the rise of dropshipping as
a novel business model. Using state-of-the-art technology, smart alliances, and a
strong web presence, this proposal lays out a strategy to build a customer-centric,
scalable dropshipping firm(Regan, 2020). The basic idea behind dropshipping is to
work with suppliers to fulfill client orders directly, rather than keeping inventory on
hand. By outsourcing tasks like inventory management, packing, and shipping to
dependable vendors, the company can concentrate on its key competencies like
marketing, client acquisition, and brand promotion. In order to cater to the special
wants and demands of [niche or audience], the planned company would provide a
hand-picked assortment of premium goods(Baluch, 2021). The company will build a
solid online presence to boost sales and consumer interaction by adopting e-
commerce platforms such as Shopify, WooCommerce, or Amazon and implementing
data-driven marketing methods. With an eye on long-term viability and financial gain,
this paper lays out the goals, tactics, and operational structure for starting and growing
the dropshipping business(Chevalier, 2023).

Introduction

Entrepreneurs are now able to create and maintain online enterprises with minimum
cash and equipment thanks to the development of e-commerce, which has made this
achievement possible. Dropshipping start up is a popular business strategy that
enables retailers to work together with their suppliers to manage fulfillment(Staff,
2024). This frees up the merchants to concentrate on marketing and growing their
brand. The company model, its growth drivers, the size of the market, and the
drawbacks are all investigated in this research. This research contains a business
model overview of previous researchers' investigations on the subject, as well as a
review of relevant literature, an examination of market data, an analysis of benefits
and drawbacks, and a discussion of the benefits and disadvantages. In order to get an
understanding of the dropshipping start up business model from the point of view of
entrepreneurs, the research techniques that were used in the project are
described(Coppola, 2021). The research makes a contribution to the current body of
knowledge and lays the groundwork for conducting more research efforts.

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Dropshipping is a low-risk business model that enables entrepreneurs to sell products
directly to customers without physical handling. This model is popular due to its low
initial investment, reduced operational complexity, global reach, and scalability.
Entrepreneurs create an online store using platforms like Shopify, WooCommerce, or
Amazon, partner with reliable suppliers, market products using social media
marketing, and fulfill customer orders(Dalin, 2020). The profit margins are
determined by the difference between the supplier's cost and the retail price.
However, dropshipping faces challenges such as finding reliable suppliers, managing
customer expectations, and competing in a saturated market. Successful dropshipping
businesses rely on strong marketing strategies, excellent customer service, and
consistent supplier relationships. In conclusion, dropshipping presents an innovative,
cost-effective way for entrepreneurs to enter the e-commerce market, offering
financial independence and business growth(Kaptzan, 2022). By leveraging digital
tools and global suppliers, dropshipping empowers anyone with ambition and
creativity to build a successful online business in the digital age(Souza, 2024).

Problem Statement

Due to the large initial expenditure required in inventory, storage, and transportation,
starting an e-commerce firm often demands a significant initial investment. This
creates a high barrier to entry for entrepreneurs(Richard, 2020). The high starting
expenses, the danger of maintaining an inventory, the complexity of the logistics, and
the inability to scale are all challenges. It is possible to incur financial losses and lose
out on sales opportunities if you either overstock or understock your inventory. In
order to grow operations, traditional retail models demand proportionate increases in
storage space, hiring personnel, and the availability of logistical resources(Mia, 2022).
It is especially important for people and small enterprises who have limited resources
to face these problems since they reduce their competitiveness in the rapidly changing
world of e-commerce. It is necessary to make available a solution that is not only
cost-effective but also adaptable and scalable in order to enable entrepreneurs to
achieve success in online retail without the responsibilities of inventory and logistics
management(Carter, 2021).

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Significance of research

Considering its minimal initial costs, scalability, and flexibility, dropshipping is a

business model that is appealing to new business owners. The concept calls for a very
little initial investment in comparison to conventional retail enterprises, which are
required to make substantial purchases of goods(Yu, 2021). Customers from a wide
range of socioeconomic backgrounds are able to participate in the e-commerce sector
as a result of this accessibility. Another advantage of dropshipping is that it allows
businesses to try out different product segments without taking on a large amount of
risk. As a result of the ability of company owners to rapidly adjust their business
strategy in response to shifting customer preferences, this model is an excellent fit for
the dynamic and ever-changing global marketplace(Cheong, 2023).

Objectives of the research

The aim of the research is to deliver a comprehensive examination of the

dropshipping start up business model, and the purpose of this project is to introduce
the reader to the growth of the ecommerce market, introduce the reader to popular e-
commerce business model, and evaluate the benefits and disadvantages of the
dropshipping business model and the potential scalability of dropshipping from e-
commerce retailer’s point of view.

 Identifying the growth trajectories and consumer preferences in the dropshipping

sector.

 Analyzing key elements that contribute to the success of dropshipping ventures,

such as product selection, marketing strategies, and supplier partnerships.

 Investigating common challenges faced by dropshipping businesses and

proposing innovative solutions to address them.

 Evaluating the long-term viability of the dropshipping model in light of emerging

technologies and market shifts.

Research Questions

 What are the critical factors that influence the success of dropshipping startups?

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 How do market trends and consumer behavior impact the viability of the
dropshipping model?
 What strategies can new entrepreneurs employ to overcome challenges in
dropshipping?
 What role does technology play in shaping the future of dropshipping businesses?

Relevance of research

In order to provide insights into the dynamics of the dropshipping model, the
conclusions of this study will be beneficial to individuals who are interested in
starting their own businesses, business advisors, and legislators. Additionally, it will
function as a resource for teachers and students who are studying entrepreneurship
and online business at the same time.

Research Gap

Dropshipping is a popular e-commerce business model with low barriers to entry and
minimal upfront investment. However, there are critical research gaps that need to be
addressed to enhance its efficacy and sustainability. These gaps include market and
niche selection, supply chain management, operational efficiency, customer
relationship management, legal and regulatory challenges, technology and tools,
marketing and advertising, financial viability, consumer perception, environmental
and ethical concerns, and funding models. Lack of research exists on consumer
behavior analysis, market saturation studies, supplier reliability, shipping delays,
inventory management algorithms, order fulfillment optimization, returns
management, customer relationship management, cross-border compliance, liability
issues, data protection, technology and tools, marketing and advertising, financial
viability, consumer perception, environmental and ethical concerns, and the impact of
dropshipping on consumer awareness and buying decisions. Filling these gaps can
lead to the development of a more robust and reliable framework for dropshipping
startups, addressing operational inefficiencies, market challenges, and ethical
considerations to ensure long-term growth and customer satisfaction.

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Literature review

Businesses have had to adapt to new ways of doing things, and one of the most
popular models is dropshipping, thanks to the meteoric development of online
shopping and its subsequent explosive expansion in 2020 (UN 2021). In the retail
fulfillment technique known as "dropshipping," the seller does not keep physical
inventory of the things they sell. The business buys the product from an outside
vendor and arranges for its direct shipment to the buyer whenever the buyer places an
order (Ecomcrew, 2023). Business models such as dropshipping are defined as "an
arrangement in which a manufacturer sends products directly to buyers at the request
of businesses who advertise and sell the products but do not stock them" according to
the Cambridge lexicon (Cambridge dictionary, n.d.). The supplier, the retailer, and the
client are the three parties involved in the dropshipping paradigm. Making an online
shop, advertising the items, and fulfilling customers' purchases are all tasks that fall
on the retailer's shoulders. Products are either made by the supplier or sent straight to
the buyer by the supplier. Both the product's delivery and the customer's payment are
the customer's responsibility. "A drop-shipping arrangement is defined by a profit-
sharing contract that aligns the incentives for the manufacturer and the etailer" (Yu,
Cheong & Sun 2017,555), as stated by Yu et al. (2017,555). Platforms like Amazon
and eBay, along with advertising tools like Facebook Ads and Google Ads, provided
significant opportunities for dropshipping. The launch of AliExpress by Alibaba in
2010 altered the dropshipping business model by providing consumers and businesses
with a platform to easily purchase goods from Chinese manufacturers and
dropshippers. E-commerce platforms such as Shopify and Oberlo emerged, providing
an easy way to set up an ecommerce store and semi-automatically turn them into an
AliExpress dropshipping stores (Comenanescu, 2021). Unlike traditional retail
models, dropshipping requires minimal capital investment. Entrepreneurs can launch
online stores without incurring expenses related to warehousing or inventory
procurement (Smith, 2019).Dropshipping allows businesses to scale operations
quickly, as they are not constrained by physical inventory. Research by Lee and Park
(2022) highlights how dropshippers can experiment with diverse product categories
and adjust to market demands dynamically. The model mitigates risks associated with
unsold inventory. According to Johnson (2020), dropshipping enables businesses to
test products in real-time before committing to bulk purchases.The reliance on third-

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party suppliers can result in delays, stockouts, or quality control issues. Jones and
Carter (2021) argue that these factors may negatively impact customer satisfaction
and brand reputation.ue to intense competition and supplier pricing structures, profit
margins in dropshipping can be slim. Strategies to enhance profitability, such as
effective marketing and upselling, are critical (Patel, 2021).Technological tools, such
as AI-driven analytics, SEO, and automation software, are pivotal for dropshipping
success. According to Martinez (2022), these tools enable businesses to identify
trends, optimize pricing, and enhance operational efficiency. Differentiating through
branding and superior customer experience is essential in a competitive dropshipping
landscape. Nelson (2021) suggests that businesses must invest in user-friendly
website design, personalized marketing, and robust customer support.Establishing
reliable partnerships with suppliers is critical. Collaborative relationships help in
ensuring timely deliveries, consistent quality, and better negotiation on pricing (Wong
& Lee, 2020).The environmental impact of dropshipping is an emerging area of
concern. Increased shipping distances and packaging waste contribute to its carbon
footprint. Recent studies by Green and Kim (2022) advocate for sustainable practices,
such as using eco-friendly packaging and collaborating with local suppliers.

Research Methodology

Feasibility Study

This feasibility study assesses the potential of launching a dropshipping business as a

start-up. Dropshipping is an e-commerce model where retailers sell products without
holding inventory, with third-party suppliers managing stock and shipping orders
directly to customers. The global dropshipping market is projected to reach $591.77
billion by 2027, driven by the increasing trend of online shopping and low operational
costs. The target market includes young adults, tech-savvy online shoppers, niches
like fitness, home decor, pet supplies, and sustainable products, and underserved
markets. The business model involves using platforms like Shopify or
WooCommerce, integrating dropshipping suppliers, and focusing on automated order
fulfillment. The revenue model includes a profit margin per product of 20-50%, with

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additional revenue streams like affiliate marketing, upselling, and premium
memberships. The financial feasibility includes initial investment of $300-$500,
marketing budget of $1,000-$2,000, monthly platform fees of $29-$79, marketing and
advertising of $300-$500, and contingency funds of $200. Revenue projections range
from $10,000-$30,000 for year one and $50,000-$80,000 for year two. Challenges
include supplier reliability, market saturation, and profit margins. Mitigation
strategies include partnering with verified suppliers, investing in customer service,
and targeting niche markets with lower competition.

Research Design
The research will utilize a mixed-method approach to examine the viability and
challenges of dropshipping as a business model for start-ups.

Qualitative Analysis

To gain insights into the operational processes, opportunities, and challenges from
entrepreneurs using dropshipping start up.

Quantitative Analysis

To assess the financial feasibility, market trends, and customer satisfaction metrics.

Research Approach
Exploratory Research

To understand the basic structure, key actors, and components of dropshipping start
up.

Descriptive Research

To describe and measure the effectiveness of dropshipping as a start-up business

model.

Market Research and Niche Selection

Employing market research tools like as Google Trends, SEMrush, and Amazon Best
Sellers, doing competitor analysis, determining your target audience, and
concentrating on items that have high demand, low competition, and decent profit

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margins are all important steps to take in order to achieve success in the dropshipping
sector.

Supplier Sourcing and Partnerships

Platforms such as AliExpress, Oberlo, and Spocket, as well as direct manufacturer

collaborations, may be used in order to locate suppliers. Examine the reviews,
delivery timeframes, return policies, and quality control procedures of the provider in
order to determine the dependability of the source. Engage in negotiations over the
arrangements, including price and delivery terms. Come to an arrangement with your
suppliers in writing.

Website Development

An e-commerce platform such as Shopify, WooCommerce, or BigCommerce should

be selected, a user-friendly interface should be designed, search engine optimization
(SEO) should be optimized through the use of keyword strategies, meta tags, and
high-quality content, secure payment gateways such as PayPal and Stripe should be
established, and operations should be automated through the use of plugins and tools
for order processing, inventory updates, and customer communication.

Marketing and Customer Acquisition

Employ marketing strategies such as social media marketing, content marketing,

email marketing, paid advertising, and analytics in order to showcase products,
engage customers, construct a mailing list, invest in Google Ads, Facebook Ads, and
influencer partnerships, and make use of tools such as Google Analytics in order to
monitor traffic and optimize campaigns.

Customer Service and Retention

Set up a customer service system that includes live chat, email, and phone assistance
for inquiries from customers. In addition to providing contact information, shipment
timeframes, and return policies, you should also provide clear policies. You may
improve the shopping experience by implementing loyalty programs for consumers

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who purchase with you again and again, as well as by collecting feedback via surveys
and reviews.

Scaling Operations

Expansion, diversification of product offerings, increased marketing efforts,

investment in technology for inventory management, data analytics, and customer
relationship management, and optimization of shipping by forming partnerships with
suppliers of quicker delivery or constructing regional warehouses for faster delivery
are all goals that need to be accomplished.

Resource Requirements

Financial

Initial investment

$5,000 - $15,000 (for website development, marketing, and operational expenses)

Ongoing costs

$500 - $2,000/month (including platform fees, ads, and software tools).

Human Resources

Core team

Founder, marketer, customer service representative.

Freelancers

Graphic designer, content writer, and SEO specialist as needed.

Tools and Technology

E-commerce platform

Shopify or WooCommerce.

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Marketing tools

Canva, Mailchimp, and Google Ads.

Analytics

Google Analytics and Hotjar.

Automation tools

Zapier, Oberlo, or equivalent dropshipping plugins.

Risk Management

Supplier reliability

Maintain relationships with multiple suppliers to mitigate risks.

Shipping delays

Communicate clear delivery timelines to customers.

Competition

Focus on superior customer service and branding to differentiate from competitors.

Ensure all operations adhere to tax laws, data protection regulations, and intellectual
property rights.

Tools used for the research

The convenience store will use Google forms for demand checking, Microsoft Excel
for financial planning and record-keeping, Adobe Illustrator and Photoshop for
promotional design, and social media apps such as Facebook and Instagram for
marketing.

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Business Timeline

Exploration and Progression

Carry out market research, determine the demand, the target audience, and the
competitors; finish the business strategy; negotiate with suppliers and logistical
partners; acquire money; and decide where the shop will be located.

Preparation and Carryout

As part of the role, we will be responsible for planning shop layouts, registering with
the authorities, recruiting and training personnel, sourcing and importing goods, and
establishing marketing campaigns.

Beginning and Running

Conduct a soft launch, have a grand opening with special offers, evaluate store
performance, sales, and feedback from customers, and adjust marketing tactics and
operations in order to achieve long-term success.

Project Time Line

Here’s a proposed project timeline for a dropshipping business startup, covering six
months in 2025. This timeline outlines essential tasks and milestones to guide the
launch and growth of your dropshipping venture:

Month 1: Research and Preparation

Week 1-2: Market Research

 Identify niche markets and profitable products

 Research competitors and identify gaps

 Analyze customer behavior and preferences
 Assess supplier options (AliExpress, Oberlo, etc.)

Week 3-4: Business Planning and Legal Setup

 Create a business plan (mission, vision, goals, marketing strategies)
 Choose a business name and register domain
 Set up a legal structure (sole proprietorship, LLC, etc.)
 Apply for an EIN (Employer Identification Number) if needed

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Month 2: Build the Online Store

Week 1-2: Website Design and Setup

 Choose an e-commerce platform (Shopify, WooCommerce, BigCommerce)
 Purchase a domain and hosting
 Set up website theme (customize design for user experience)
 Add essential pages (Home, About, Contact, FAQ, Policies)

Week 3-4: Supplier Integration and Product Listings

 Sign contracts with reliable suppliers
 Import products to the store (using apps like Oberlo or Spocket)
 Write detailed product descriptions and set competitive pricing
 Set up payment gateways (PayPal, Stripe, etc.)

Month 3: Branding and Marketing Foundation

Week 1-2: Branding and Logo Design

 Design a professional logo and brand identity
 Choose brand colors and typography
 Create a cohesive brand message for your target audience

Week 3-4: Marketing Strategy Setup

 Develop a social media marketing plan (Instagram, Facebook, Pinterest)
 Start creating email marketing templates
 Set up Google Analytics and Facebook Pixel for tracking

Month 4: Launch and Initial Marketing Push

Week 1-2: Soft Launch

 Test website functionality (order process, mobile responsiveness)
 Launch the store to a small audience (friends, family, beta testers)
 Gather feedback and make adjustments as necessary

Week 3-4: Full Launch & Advertising

 Run paid ads (Facebook Ads, Google Ads, Instagram) to drive traffic
 Start influencer partnerships or collaborations for exposure

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  Publish blog posts or videos related to products to improve SEO
 Create promotional offers (discounts, free shipping, etc.)

Month 5: Growth and Optimization

Week 1-2: Customer Engagement and Retargeting

 Set up customer service channels (email, live chat, etc.)
 Implement retargeting ads to recapture abandoned cart visitors
 Engage with customers on social media (respond to comments, DM, etc.)

Week 3-4: Data Review and Performance Optimization

 Review analytics data (traffic sources, conversion rates, etc.)
 Test different ad creatives and strategies for higher ROI
 Optimize website speed and mobile functionality
 Improve product descriptions, images, and reviews based on feedback

Month 6: Scaling and Long-Term Strategy

Week 1-2: Expand Product Range and Marketing

 Add new products based on customer feedback and market trends
 Launch new ad campaigns for more targeted traffic
 Start building a loyalty program for repeat customers

Week 3-4: Analyze Profitability and Future Planning

 Calculate total revenue, expenses, and profit margins
 Plan the next steps for scaling (hiring, outsourcing, new marketing channels)
 Set long-term goals (expanding into international markets, automating
operations)

Ongoing Tasks (Throughout All 6 Months)

 Monitor customer feedback and reviews

 Continue optimizing marketing efforts (SEO, social media content)
 Adjust product offerings and pricing based on market trends
 Keep track of supplier performance and product quality

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References

Genovés Navarro, G. (2021) A practical exploration of the Drop-shipping business

model in ecommerce: two case studies. publication. The University of Rovira I Virgili
(URV). Available at: https://repositori.urv.cat/estatic/TFG0011/en_TFG3124.html
(Accessed: 09 May 2023).

Sleeth, T. (2022) Is dropshipping unethical? A dropshippers opinion!, Dropshipping

Hustle. Available at: https://www.dropshippinghustle.com/2021/08/08/is-
dropshipping-unethical/ (Accessed: 04 June 2023).

Regan, B. (2023) Dropshipping: Does it actually work? (pros + cons), The

BigCommerce Blog.
Available at:https://www.bigcommerce.com/blog/dropshipping/#dropshipping-for
beginners-faqs (Accessed: 29 May 2023).

Baluch, A. (2023) 38 e-commerce statistics of 2023, Forbes. Forbes Magazine.

Available at:
https://www.forbes.com/advisor/business/ecommerce-statistics/#sources_section

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(Accessed: May 5, 2023).

Chevalier, S. (2022) Global retail e-commerce sales 2026, Statista. Stephanie

Chevalier. Available at: https://www.statista.com/statistics/379046/worldwide-retail-
e-commerce sales/ (Accessed: May 4, 2023).

Staff, E. (ed.) (2023) Wholesale dropshipping: Everything you need to know,

Wholesale Suite. Available at: https://wholesalesuiteplugin.com/wholesale-
dropshipping-wholesalecustomers/ (Accessed: 07 June 2023).

Coppola, D. (2021) Digital Buyers Worldwide 2021, Statista. Daniela Coppola.

Available at: https://www.statista.com/statistics/251666/number-of-digital-buyers-
worldwide/ (Accessed: May 4, 2023)

Souza, K. (2017) The supply side: Drop Shipping an 'interesting option' for online
retailers, Talk Business & Politics. Available at: https://talkbusiness.net/2017/09/the-
supply-sidedrop-shipping-an-interesting-option-for-online-retailers/ (Accessed: May
6, 2023).

Saunders, M.N.K. (2015) Research methods for business students. 7th edn. Harlow,
Essex, England: Pearson Education Limited. Available
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(Accessed: 23 May 2023).

Threlfall, D. (2022) What is dropshipping: The ultimate guide [updated for 2022],
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