If you’re seeking an online business opportunity, chances are that you’ve come across dropshipping. Dropshipping is a modern online business model that requires very little initial investment. But how does dropshipping work, and why should you go for this model to realize your entrepreneurial dream?
But before we get any further, it’s important that you have an answer to the question ‘what is dropshipping?’
What is Dropshipping?
Dropshipping is a type of retail fulfillment method, where instead of a store stocking products, it purchases the products from a third-party supplier. The products are then shipped directly to the consumer. This way, the seller doesn’t have to handle the product directly. Sound familiar? Maybe not, but 33 percent of online stores use dropshipping as a fulfillment model.
For the store, this is a mostly hands-off process. The merchant doesn’t have to order inventory or fulfill the orders in any way. Instead, the third-party supplier takes care of the product itself.
Dropshipping is great for entrepreneurs because it doesn’t demand as much as the traditional retail model. You don’t have to open a brick-and-mortar store, pay overhead, and stock products. Instead, you open an online storefront and buy wholesale from suppliers who already have products and warehouse space.
The merchant is mainly responsible for gaining customers and processing orders in dropshipping, meaning you’ll effectively be a middleman. Despite this, you’ll reap the lion’s share of the profit by marking up the items you sell. It’s a simple business model and one that can be very rewarding.
Millions of entrepreneurs flock to it because it requires less hassle and money to get started. That’s probably why you’re interested! And the best news of all? With dropshipping, you can build a business that’s sustainable in the long term right from your laptop.
Of course, there are many drawbacks and advantages, and it’s important that we look at them before you start your own dropshipping ecommerce business. Once you understand the pros and cons of dropshipping, however, learning how to do so effectively will be a breeze.
Benefits
1. Dropshipping is easy to start. You don’t need to be a business guru to get started. In fact, you don’t even need any prior business experience! If you take some time to learn the basics, you can get started quickly and learn the rest as you go along.
It is so easy because it requires very little from you. You don’t need a warehouse to store products or a team to help you out. You don’t have to worry about stocking or shipping either. You don’t even have to spend a certain amount of time every day on your store. It’s surprisingly hands-off, especially once you get going.
All of this means that you can start your business today. You can start getting everything up and running within a matter of hours.
You will need some foundational knowledge and the right tools and resources, and that’s why we created this guide. By the time you’ve finished it, you’ll be equipped with the knowledge you need to jumpstart your own dropshipping business.
2. Dropshipping is easy to grow. As you scale up, your business model doesn’t have to change very much at all. You’ll have to put more work into sales and marketing as you grow, but your day-to-day will stay more or less the same.
One of the benefits of dropshipping is that the costs don’t skyrocket when you scale. Because of this, it’s easy to keep growing at a pretty fast rate. You can do almost everything by yourself, too, unless you want to assemble a small team at some point.
3. Dropshipping doesn’t demand a lot of capital. Because starting a dropshipping business requires so little, you can get started with minimal funds. You can build an entire business right from your laptop, and you don’t need to make any high-level investments. Even as your business grows, your costs will be fairly low – especially when compared to traditional business expenses.
4. Dropshipping is flexible. This is one of its biggest benefits. You get to be your own boss and set your own rules. It’s by far one of the most flexible careers that anyone can pursue.
You can work from home with little more than a laptop, and you can work at the times that are most convenient for you. This is ideal for entrepreneurs who want a business that works for them. You won’t have to bend over backwards to get things done. Instead, you set your own pace.
Dropshipping is also flexible in that it gives you a lot of room to make decisions that work for you. You can easily list new products whenever you want, and you can adjust your strategies on the fly. If you’re going on vacation, you can automate everything to run while you’re away. You get the idea – the possibilities are limitless.
5. Dropshipping is easy to manage. Since it doesn’t require you to make many commitments, you can manage everything with little hassle. Once you’ve found suppliers and set everything up, you’re mostly only responsible for your online storefront.
Disadvantages
1. Dropshipping has slim margins. One of the disadvantages of dropshipping is that you should expect low margins initially. That’s not to say it can’t be profitable, but you should be aware that the product margin in some niches might be small.
This issue is especially problematic when you’re dropshipping in a super-competitive niche. When you’re fighting for customers’ attention, you can’t afford to make the kind of profits you want to. If you choose the right niche, you’ll see larger margins. In niches with lower competition, you’ll have better margins, but at some point sales will start to plateau. That’s why dropshipping relies on a fair amount of sales to be profitable.
2. Dropshipping can make order processing difficult. Dropshipping seems straightforward: The customer orders, you process, and your supplier fulfills. And for the most part, it is simple.
However, if you’re sourcing products from multiple suppliers, you might run into some problems. Each of your suppliers might use a different shipping solution, which presents a problem for both you and your customers. Costs can get high, and shipping multiple products can be problematic.
Different suppliers will also have different structures in place for processing and billing. Since you have to manage the interaction with your suppliers, this can get tricky.
3. Dropshipping doesn’t give you a lot of control. One of the disadvantages of dropshipping is that you don’t have much control over certain aspects of the dropshipping process such as stocking products, order fulfillment, and shipping. You have to rely on your suppliers to do everything right and work seamlessly. This lack of control can be off-putting to some entrepreneurs, but it usually isn’t a problem.
This just means that when something goes wrong, it can be tricky to manage. While supplier problems can sometimes cause customer retention issues, you can mitigate them and keep customer churn to an absolute minimum with the right damage control.
4. Dropshipping makes customer service more challenging. This is another problem that happens when orders go wrong or suppliers fail. Because you’re just the storefront and don’t have a lot of control, it can be difficult to sort out orders and handle customer support.
One of the most unfortunate disadvantages of dropshipping is that you have to take the blame when your customers complain. You could be doing everything right and still run into problems if your suppliers have issues.
Is Dropshipping for You?
Because there are both pros and cons of dropshipping, it isn’t for everyone. This is especially true for people who are looking for a get-rich-quick scheme. Even if this isn’t your approach, you still might have one of these fears:
• “I don’t know if I have enough time to start a business.”
• “I don’t want to risk getting fired from my day job.”
• “I don’t want to work so hard on dropshipping that I underperform at my 9-to-5.”
That said, nearly anyone can build a dropshipping business because you can put as much or as little into dropshipping as you want. Here are two common approaches.
Is Dropshipping Profitable?
There are many ways to start and grow a dropshipping business. Our success stories talk about merchants who have started dropshipping businesses to make a few extra hundred bucks a month, while others have grown multiple six-figure stores. Whether you are looking to start dropshipping as an introduction into ecommerce or a business model to last forever, it is important to understand how dropshipping can be profitable to you.
Dropshipping as a Side Hustle
What is dropshipping’s main appeal? Because it’s flexible and it doesn’t demand much, it’s the ideal side job. Many entrepreneurs choose to do dropshipping on the side while they have a main job that provides steady income. In other words, you don’t have to sacrifice your day job to pursue your dreams of becoming an entrepreneur.
The No. 1 worry here is that your employer will prevent you from having a side hustle, but believe it or not, many companies are fine with it. You’ll want to make sure you’re in the clear by asking about your company’s policy on side businesses and review any non-compete agreements you’ve signed. You also definitely want to ensure there’s no conflict of interest. But if everything checks out, then you’re good to go.
You don’t need to dedicate too much time and energy to dropshipping, meaning you’ll likely be able to take it on without a hitch. Worried that your side hustle will make you underperform? You don’t have to be! You can spend only a couple hours on your business every day and still succeed.
However, it’s important to know your limits. If you regularly work overtime at your day job and struggle to find time for important daily responsibilities, you might not be able to give a dropshipping business the attention it needs. Even though dropshipping doesn’t require a lot, you do need to carve out time in your day for it.
In most cases, it just takes a little bit of time management and scheduling. Plenty of dropshipping retailers manage their main and side jobs easily. You don’t need to sleep three hours a night or skip meals to make it work. You’ll need to figure out a schedule that works for you and stick to it religiously.
Dropshipping as a Full-Time Ecommerce Business
One of the benefits of dropshipping is the flexibility. You can make your business as big or as small as you want it to be. Many dropshippers choose to do it on the side, but it’s also a viable career path. If you want to be a full-time dropshipping retailer, you can be!
It’s easy to scale up your business with dropshipping, meaning you can grow your business pretty quickly while keeping costs down. Once you’ve reached customers and gotten enough sales, you can move from dropshipping part-time to full-time. Best of all, you can make this happen at whatever pace you want.
Obviously, this is going to take more work, but the payoff is well worth it. Once you figure out how to dropship effectively, you won’t have to worry about unsteady revenue. A well-established dropshipping ecommerce business operates like clockwork, and it can even feel like you’re generating passive income.
And since it doesn’t take up a lot of time, you could even take on a side hustle while still being a full-time dropshipping retailer! The sky’s the limit. Maybe you’re rolling your eyes right now at the thought of becoming a full-time dropshipper, but there are thousands of success stories from entrepreneurs who started out right where you are today. It doesn’t take a degree in business or millions in capital to make a living from it.