Hey there, @privelho
Bo here from Shopify Support!
That is a really great question and the answer to it in its simplest form is taxes. In order for Shopify to know what taxes you need to be charging it needs to know where you are located. As tax laws differ from State to County to District in some cases it is super important that the system knows where you are located so it knows what taxes to charge so you can easily file them correctly.
Shopify actually isn't all about dropshipping! We have tonnes of merchants on the platform that have their own products and take care of the fulfillment of their orders themselves. Shopify is filled with all sorts of business models from dropshipping to custom crafting and everything in between. As you are dropshipping I am curious as to why you are using the POS app. The POS app is used to sell in person much like a till. It is important for the POS app to know where you are located for the same reason - it is operating as a physical point of sale and so the location needs to be registered.
I hope this clears things up. Let me know if there is anything else I can assist you with, I'm happy to help!
All the Best,