Dropshipping is selling goods you never stock: the customer pays you, you pay a supplier, and the supplier delivers to the customer. It cuts the money you need to start, because you buy each item only after it has sold.
The catch is the margin. Once delivery, adverts, failed deliveries and returns are paid, a dropshipped order can keep less than a tenth of its price. The Nairobi example below works it out.
How dropshipping works, step by step
Dropshipping runs in five steps, and the money moves twice: from the customer to you, then from you to the supplier.
- You agree terms with a supplier: their price to you, their delivery times, and what happens to returns.
- A customer orders in your online shop, on Instagram or WhatsApp, or on a marketplace. They pay your price, or agree to pay on delivery.
- You pass the order to the supplier with the delivery address, and pay their price.
- The supplier packs and sends the goods, under your shop's name if you agreed it.
- The customer receives the goods, and comes to you if anything is wrong.
You are the seller the customer knows. In the US Chamber of Commerce's words, "the retailer is the seller of record". Complaints, refunds and taxes are yours, even when the supplier caused them.
What a dropshipping order really earns: a worked example
A dropshipped order earns its price, less the supplier's price, less everything you pay to win and deliver it. Most guides stop at the first subtraction, which is why dropshipping looks richer than it is.
For example, a seller in Nairobi sells a rechargeable desk lamp for KES 2,500, delivery included, through Instagram and WhatsApp adverts. Compare dropshipping it from a Nairobi wholesaler with buying a carton and holding it. Every figure is an assumption for the example.
| Per delivered order | Dropshipped | Bought by the carton |
|---|---|---|
| Price the customer pays | 2,500 | 2,500 |
| Product cost | 1,600 | 1,300 |
| Rider delivery in Nairobi | 250 | 250 |
| Payment fee, assumed at 1% | 25 | 25 |
| Adverts per delivered order | 300 | 300 |
| Refused parcels: 1 for every 10 delivered, each wasting two rider trips (500) | 50 | 50 |
| What the order earns | 275 | 575 |
| As a share of the price | 11% | 23% |
The dropshipped lamp's 36% gross margin shrinks to 11% once the order is delivered and paid for. Adverts decide the rest: at KES 575 of adverts per delivered order, it earns nothing.
Returns cut deeper. If 1 lamp in 25 comes back faulty and the supplier won't take it back, each order carries KES 64 more, leaving KES 211: 8.4% of the price.
At 40 orders a month, before returns, dropshipping earns KES 11,000 and holding stock KES 23,000. A carton of 20 lamps costs KES 26,000 up front, about 15 days of sales.
So dropshipping is a way to test a product, not the cheapest way to sell a proven one. Once a line sells steadily, a carton on your own shelf earns more per order, at the price of the cost of holding stock.
Who dropshipping suits in Africa, and who it doesn't
Dropshipping suits light, sturdy goods with room for a delivery fee, sold in a city where the supplier delivers within a day or two. It fails on cheap items, fragile ones, sizes that get exchanged, and buyers who pay only at the door.
| Factor | Suits dropshipping | Works against it |
|---|---|---|
| Payment | Paid before dispatch, by mobile money or card | Cash on delivery, where a refusal costs the trip both ways |
| Delivery | A supplier in the same city, delivering in a day or two | Goods sent from abroad, which may owe duty on arrival |
| Returns | The supplier takes back faulty goods | The supplier's terms say no returns |
| Product | Light, sturdy, one size, priced well above the delivery fee | Cheap or fragile items, and clothes or shoes in sizes |
| Competition | A product few sellers in your town offer | A product every advert in your feed already sells |
Paying before dispatch is easier than it was. The GSMA reports more than $2 trillion through mobile money wallets worldwide in 2025, with most new accounts in Sub-Saharan Africa.
Ask for payment before the supplier sends, or a deposit, and say so in the advert. Every refused parcel in the example costs KES 500 and earns nothing.
Goods ordered from abroad can owe import duty and VAT on arrival, under each country's own rules. Check with your revenue authority before you promise a price or a delivery date.
Dropshipping vs other ways to sell online
Dropshipping is one of five ways to get goods to online buyers, and it trades the most margin for the least money up front.
| Model | Who buys the stock | Who stores and ships | Your earnings per order | Your control |
|---|---|---|---|---|
| Dropshipping | The supplier | The supplier | Lowest | Low: quality and speed are the supplier's |
| Holding your own stock | You | You | Highest | Full |
| A fulfillment company (3PL) | You | The fulfillment company, for a fee | Middle | Medium: you choose the stock, they ship it |
| A marketplace's own fulfillment | You | The marketplace | Middle, after its fees | Medium, within its rules |
| Affiliate marketing | The merchant you refer buyers to | The merchant | A commission only | None: you only send buyers |
With affiliate marketing, a business pays you a commission for the sales you send it. You never touch the goods or the customer's money.
Holding stock brings inventory and warehouse work that dropshipping avoids. The choice between doing it yourself and paying a fulfillment company is worked through in order fulfillment strategies.
How to start a dropshipping business in seven steps
Start with one product and one supplier you have tested, and decide in advance what each order may spend on adverts.
- Choose a niche. Pick a narrow group of buyers and a product that passes the table above.
- Research the market. Price the product against marketplace listings, Instagram sellers and the shops in town.
- Find a supplier and test them. Order a sample to your own address and time it. Measure each supplier's delivery time the way order cycle time describes.
- Register the business as any trader would: with URSB in Uganda, the Business Registration Service in Kenya or the CAC in Nigeria.
- Set up where you sell. A website, a marketplace, or Instagram and WhatsApp, each with clear prices and delivery times.
- Market and measure. Work out your break-even advert cost per order first; in the Nairobi example it is KES 575.
- Prepare customer service. Write your delivery times and returns policy to match the supplier's, and answer messages the same day.
How to choose a dropshipping supplier
Choose the supplier who answers these questions in writing before your first order. Order a sample first, and prefer the maker or importer over a middleman, who adds a price and a delay.
| Ask | A good answer |
|---|---|
| How long from my order to the customer's door? | A number of days for your city, in writing |
| Do you give a tracking number or the rider's phone? | Yes, for every order |
| What happens to damaged, lost or refused parcels? | They replace or refund, and say who pays the trip back |
| What is your returns policy? | One you can repeat to your own customers |
| Are there fees beyond the product price? | A full list: packing, delivery, cash handling |
| How will I know when you run out? | A stock list you can check before you accept an order |
Read other sellers' comments on the supplier, and send a question before you sign. A supplier who answers slowly now will answer slowly when a parcel is lost.
Keep a second supplier for each product. When the first runs out, you switch instead of cancelling orders.
Where ArmPOS fits
ArmPOS does no dropshipping automation: nothing in it forwards an order to a supplier. It fits the step after, when a tested product sells steadily and you start holding stock.
- Sell online and at a counter from one stock. ArmPOS's online store sells from the same stock as the till: Set up your online store.
- Turn orders into sales. Confirming an online order makes it a sale and takes the stock: Online orders.
- Take mobile money. In Kenya and the other 11 MarzPay countries, customers can pay by mobile money. It needs a paid plan and your own MarzPay account: Card and mobile money payments.
- Track deliveries. A sale's shipment moves from Packed to Shipped to Delivered: Shipments and deliveries.
Selling online from your own stock is covered in ecommerce inventory management.
Frequently asked questions
Is dropshipping legal in Kenya, Uganda or Nigeria?
Dropshipping is a way of delivering ordinary retail sales, so the rules for any trader apply: registering the business, paying tax and honouring consumer rights. Check the details with your business registry and revenue authority.
How much money do I need to start dropshipping?
Less than a shop needs, but not nothing. Budget for samples, a month of adverts, and cash to pay suppliers before customers who pay on delivery have paid you.
Is dropshipping profitable?
It can be, on the right product with tight advert spending. In the Nairobi example, a lamp with a 36% gross margin kept 11% after delivery and adverts, and 8.4% after faulty returns.
Should I dropship from abroad or from a local supplier?
From a local supplier, for most sellers starting out. Delivery in a day or two leaves the buyer less time to change their mind. Goods from abroad take longer and may owe duty on arrival.
Does ArmPOS do dropshipping?
No. Nothing in ArmPOS sends an order to a supplier. It suits the stage after, when you hold the stock of products that sell.
Work out your own version of the lamp table before you spend on adverts: price, supplier's price, delivery, adverts, refused parcels and returns. When a product proves itself and you start holding stock, create a free ArmPOS account to sell it from one count.
