At the beginning of 2020, searches for “Dropshipping” hit an all-time high, according to Google Trends. So, if you’re considering dropshipping, you’re certainly not alone. For one thing, the concept of Dropshipping is simple.
Whereby, you list products for sale on your site. The products themselves are manufactured and held by a third party. And when someone places an order, the third party ships them directly to the consumer.
The ability to add inventory without having to deal with production, stocking, or fulfilling orders may seem like a dream. And the success of well-known brands that were built on dropshipping, like Wayfair, makes it all the more tempting.
But is Dropshipping worth it? Let’s explore some of the advantages and disadvantages to help you make the best decision for your business.
What is Dropshipping?
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the Dropshipping model, it purchases the item from a third party and has it shipped directly to the customer.
As a result, the seller doesn’t have to handle the product directly. Not forgetting, the biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory.
And instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders. So to say, dropshipping is a great business model for aspiring entrepreneurs to start with because it’s accessible.
With dropshipping, you can quickly test different business investment ideas with a limited downside. Eventually, which lets you learn a lot about how to choose and market in-demand products.
Is dropshipping worth it?
Without breaking the bank or spending a ton of time, chances are they’re going to tell you that dropshipping is the way to go. For instance, if you have the right tools.
As an example, WooCommerce extensions offer you everything. From marketing to bookkeeping, so you don’t have to work on your store 24/7.
What this means is that you can start dropshipping inexpensively and scale your store as much as you’d like.
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The WooCommerce Dropshipping extension was designed to make the entire process hassle-free, allowing you to:
- Automatically send order notifications to suppliers
- Import inventory on a per-supplier basis
- Assign products to specific suppliers
- Create special, locked-down accounts for suppliers with order and shipping information and packing slips
- Customize packing slips for consistency
WooCommerce provides the perfect launching pad for dropshipping businesses.
Whereby, you can create an online store in no time, enjoy world-class support, and take advantage of thousands of marketing, payments, and other store management tools. You can read more about how you can start your dropshipping store with WooCommerce.
Read more about the WooCommerce Dropshipping Extension
Also, looking for ways to get started selling on Amazon but don’t want to spend a lot of time or money doing it?
- First, an Amazon customer purchases the product you’ve listed on Amazon.
- Secondly, once the transaction is finalized and you receive the funds, you can purchase the products directly from the supplier.
- Lastly, with the buyer’s information in hand, the supplier then sends the product to the customer.
You can read and learn more about How does Amazon dropshipping work?
Here are a few other reasons why dropshipping is such a popular model.
It’s easy to get started
Running an ecommerce business is much easier when you don’t have to deal with physical products.
But, with dropshipping, you don’t have to worry about:
- Managing or paying for a warehouse
- Packing and shipping your orders
- Tracking inventory for accounting reasons
- Handling returns and inbound shipments
- Continually ordering products and managing stock level
It has low overhead
Simply, because you don’t have to deal with purchasing inventory or managing a warehouse, your overhead expenses are quite low.
In fact, many successful dropshipping stores are run as home-based businesses. Requiring little more than a laptop and a few recurring expenses to operate. And as you grow, these costs will likely increase. But, will still be low compared to those of traditional brick-and-mortar business stores.
In addition, a dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business.
Little capital is required
Probably, the biggest advantage of dropshipping is that it’s possible to launch an ecommerce store. In that case, without having to invest thousands of dollars in inventory upfront.
Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory. With the dropshipping model, you don’t have to purchase a product. Unless you’ve already made the sale and have been paid by the customer.
Without significant up-front inventory investments, it’s possible to start sourcing products and launch a successful dropshipping business with very little money.
And because you’re not committed to selling-through any inventory purchased upfront, there’s less risk involved in starting a dropshipping store. Just like in a traditional retail business.
Easy to start and test
By the same fashion, dropshipping is a useful fulfillment method. For both launching a new store and for business owners looking to test the appetite customers have for additional product categories. For example, in terms of accessories or wholly new product lines.
The main benefit of dropshipping is, again, the ability to list and potentially sell products before committing to buying a large amount of inventory.
Since you don’t have to pre-purchase the items you sell, you can offer an array of trending products to your potential customers. And if suppliers stock an item, you can list it for sale on your online store at no additional cost.
It’s easy to start scaling
With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work.
By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers. Allowing you to expand with fewer growing pains and less incremental work.
Not to mention, sales growth will always bring additional work. Especially, related to customer support. But, businesses that utilize dropshipping scale particularly well relative to traditional ecommerce businesses.
Passive income with no or minimal risks
Generally, passive income is earned with little to no daily effort (though it does require upfront work and consistent monitoring).
With dropshipping, it’s very possible for you to be working on other aspects of your business (or even be asleep!) while orders are placed and fulfilled automatically. With a traditional retail model, products couldn’t go out without your involvement.
Additionally, innovation is critical for keeping customers engaged. But, the fear of investing money into new products with unproven track records prevents many business owners from moving forward.
Dropshipping lets you test new product lines without spending lots of money. And if customers don’t respond to a new item, you can simply remove it from your online business store!
What are the Disadvantages of Dropshipping?
All the benefits we mentioned make dropshipping a very attractive model for anyone getting started with an online store. Or for those looking to expand their existing product offerings.
But, like all approaches, dropshipping has its downsides, too. Generally speaking, convenience and flexibility come at a price.
Here are a few shortcomings to consider.
A race to the bottom
Differentiating your store can be difficult when many stores try to compete on price. Whereby, with so much competition, business stores find themselves setting lower and lower prices.
And if you’re not careful, you’ll sell lots of inventory. But, at prices so low that you end up losing money. Both traditional and online stores often require a hefty financial investment to develop, manufacture, and source products.
There are also additional costs associated with stocking inventory. Also, maintaining a physical presence, staffing locations, and marketing to new customers can really add up!
Meaning, dropshipping has a much lower barrier to entry. Simply, because you don’t have to worry about developing new products or purchasing and storing inventory.
No inventory management
Traditionally, retailers pay upfront production costs, wait for delivery, and then stock products in a shop or warehouse. If a product isn’t available for customers when they want to make a purchase, sales are lost.
Inventory management also requires storage and handling costs — someone has to fold shirts and put them on the shelves! And you might purchase or manufacture large volumes of inventory that don’t sell, so there’s significant financial risk involved.
In reality, businesses that drop-ship (like Amazon), on the other hand, remove those risks. A third party handles inventory, and products are available to the customer on demand.
No physical storefront or warehouse
Dropshipping nixes the need for a physical storefront — which means no lease, no mortgage, no construction costs, no upkeep.
Typically, retailers purchase products, wait for them to arrive, and then sell them to customers. For a period of time, they’ve spent a significant amount of money without the ability to make it back.
With dropshipping, you receive payment for the products at the same time you pay your providers — or before. This frees up cash for marketing and growth.
High competition and lack of control
As a matter of fact, the low barrier to its entry makes dropshipping attractive to heavy competition.
Other stores aren’t selling similar products — they’re selling the same products from the same third-party manufacturers. You’ll have to find other ways to stand out in order to compete.
When dropshipping, inventory rarely passes through your hands, so you don’t have the chance to ensure that products are in top condition. Without quality control, you’re putting your store’s reputation in the hands of a third party.
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One bad batch of products could lead to unhappy customers and lost sales.
And unless you have a special deal with your suppliers, you can’t use packaging to make your store unique. Or even, include coupons to drive additional purchases.
Fee structures can also be complicated and can change with little notice. As your store grows and develops a strong reputation, you can start negotiating exclusive deals with suppliers.
But until then, you’ll have less favorable profit margins and be a lower priority for vendors. High fees can quickly eat away at profits or force you to price goods out of reach for your customers.
Bulk discounts and disjointed orders
One of the reasons big-box retailers can sell products at such low prices is economies of scale. They get major discounts on products because they purchase such a large volume, and they pass those discounts on to shoppers.
With dropshipping, you can say goodbye to bulk discounts, since you’re essentially purchasing products one at a time. Until you generate enough sales to give you some negotiation leverage, you’re paying what the suppliers ask.
If you have a variety of products listed in your store, they may come from different suppliers. Customers may receive multiple packages for the same order. After all, which can lead to high shipping costs and wasteful packaging. As well as, confusing branding, and annoyed customers.
How do I Make Dropshipping work for me?
First, successful dropshipping starts with picking the right products and vendors. Whereby, sloppy packaging or delayed shipping reflects poorly on you.
So, be that as it may, take the extra time to thoroughly vet all of your potential vendors. And in that case, read and learn more about how to decide which products to dropship.
Marketing, branding, and customer service are absolutely critical to success with dropshipping. Since anyone can sell similar products, you don’t want to only compete on price.
And because margins can be very thin with dropshipping, it’s important to turn one-time buyers into repeat customers. You’ll also need an attractive, Google SEO friendly, AMP responsive, and an overall effective blogging website.
Dropshipping is an e-commerce method in which the seller takes orders on behalf of a manufacturer, distributor, or supplier. Then, when a customer buys the product, the seller uses their supplier to fulfill those sales.
Often, drop shippers reposition the sold goods as their own. And the end consumer is never aware that the goods are directly from the manufacturer. This practice is popular on e-commerce sites like Amazon, eBay, and Shopify.
One popular form of dropshipping is print-on-demand. Print-on-demand allows you to advertise customized products such as t-shirts, mugs, posters, and even books. Without purchasing inventory. Then, when the sale is made, the supplier creates the product for you, then ships it.
You can read and learn more about Print on Demand: A Low-Risk Way to Sell Custom T-Shirts, Books, and More!
I hope you enjoyed reading and benefited from the above-revised guide on the best Dropshipping tools.
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