Dropshipping in Zoho Inventory: How It Works and How to Set It Up

Dropshipping means the goods never pass through your warehouse: you sell to the customer, your supplier ships directly to them, and you earn the margin between the two. Plenty of Indian traders, distributors and D2C brands run a hybrid model, stocking fast movers themselves and dropshipping bulky, slow-moving or made-to-order lines. Zoho Inventory supports this natively, but the workflow has a few rules that are worth understanding before you switch it on.

The dropship workflow at a glance

Partial, complete and bulk dropships

• Complete dropship: the whole sales order goes to one vendor. Zoho opens a new purchase order with the items and delivery address prefilled; choose the vendor and save
• Partial dropship: tick only the lines the vendor will ship, and fulfil the rest from your own stock. You can come back and dropship more lines later, which suits mixed orders
• Bulk dropship: select several sales orders for the same customer and the same delivery address, and combine their lines into a single purchase order for one vendor

Dropship purchase orders appear under the sales order's Dropshipments tab, and both the Sales Orders and Purchase Orders lists have filters to separate dropships from regular stock orders. That separation matters for reporting, because a buyer reviewing open purchase orders needs to know which ones will never arrive at the warehouse.

Conditions that catch teams out

• Only confirmed sales orders can be dropshipped, and only if they do not yet have invoices or packages. Decide on dropship before you invoice or pack
• Complete dropship is unavailable once the sales order has backorders, invoices or packages. Use partial dropship for the remaining lines instead
• Bulk dropship needs the same customer and the same delivery address across the selected orders
• Fulfilment is driven by the vendor bill, so if your accounts team records bills late, sales orders will look open longer than they really are

Setting it up properly

The feature works out of the box, but a few configuration choices make it reliable at scale:

• Set a preferred vendor and purchase price on items you regularly dropship, so purchase orders are faster to raise and margins are visible
• Use custom fields or tags to mark items as dropship-only, stock-only or either, and train the sales team on which applies
• Agree a purchase order email template and expected ship-by date with each dropship vendor, and ask for tracking numbers by reply
• Record vendor tracking details on the sales order or in a custom field so customer support can answer where-is-my-order queries without chasing the supplier
• If you sell on marketplaces or Shopify through Zoho Inventory's integrations, confirm how orders sync before routing them to dropship

Which plan do you need?

Dropshipment and backordering are included across Zoho Inventory's plans in India, including the Free plan, so the choice of plan comes down to order volume, users and locations rather than this feature.

Prices are from Zoho's India pricing page at the time of writing, exclude 18% GST and are subject to change. Monthly billing costs more. Always verify current pricing and plan limits on Zoho's official site before budgeting.

When dropshipping in Zoho Inventory is not enough

The native flow is built around one vendor per purchase order and manual vendor communication. If you route orders automatically to the cheapest or nearest supplier, need vendors to update shipment status in a portal, or run hundreds of dropship orders a day, you will want automation on top: Zoho Flow or Deluge custom functions to raise purchase orders, or a small Zoho Creator vendor portal for tracking updates.

Our take

For most SMEs running a mixed stock and dropship catalogue, Zoho Inventory's built-in dropshipment is enough: it keeps the sale, the vendor purchase order, the invoice and the bill linked, so margins and GST records stay clean. The gains come from setup discipline: preferred vendors, clear item flags and a habit of recording bills promptly. As a certified Zoho partner, we design that workflow and add automation only where order volume justifies it.