Drop Shipping
Definition
Selling products you do not stock. When an order comes in, a supplier ships it directly to your customer, and you pay the supplier per order.
Want a deeper explanation?
Drop shipping needs little cash upfront because you hold no inventory, but margins are thinner and you depend on the supplier's stock and shipping times.
The supplier's charge is your COGS, recorded when the sale happens. Watch for: supplier invoices that arrive weeks after the sale, which leaves sales in one month and their cost in another unless they are accrued.
Example
You sell a $60 lamp; your supplier charges you $34 including shipping and sends it straight to the customer. You never touch the inventory.