Dropshipping is an excellent business to start. Thanks to not requiring you to have a warehouse full of products, it’s easy to see why so many find dropshipping an attractive business model.
However, for some years now, some dropshipping gurus have started talking about how dropshipping is dead. Is that true, or is dropshipping still worth it? Continue reading to find out!
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What is Dropshipping and How Does it Work [A Quick Recap]
However, before we get into the topic at hand, some readers might be confused about what dropshipping is and how it works. So instead of leaving them in the dark, let’s quickly recap what dropshipping is.
To put it simply, dropshipping works just like any eCommerce business. However, the difference lies in how you fulfill orders. Here’s how it works:
- Customer Buys a Product - For example, your customer orders a wristwatch for $40.
- You Fulfill the Order - Now that you’ve got your order, you go to your supplier’s website and make an order. For this example, let’s say it costs you $10.
- Supplier Ships the Product Directly to the Customer - Now that your supplier has your order, it will directly send it to your customer. The remaining money will be your profit. So for this example, you would have made $30 (40-10=30)
And that’s how it works! So as you can see, the most significant benefit is that you won’t have to own a warehouse to start selling. That gives you many possibilities.
Is Dropshipping Dead or Still Profitable?
Now that everyone is on the same page, let’s get into the question: Is dropshipping dead?
Believe it or not, answering this is harder than it looks as there is no simple yes and no answer! That’s because there is some truth to it.
The biggest problem that usual dropshipping stores have is the extended shipping times. Since most dropshipping stores use Aliexpress as their supplier, they tend to sell products that ship to their customers within 2-4 weeks.
And a pretty big part of customers won’t buy because of long shipping times! According to Baymard Institute’s studies, they found that 22% people quit their checkout because of that exact reason. However, does that mean dropshipping is dead? Absolutely not!
There’s still a lot of money to be made in this industry. According to Torchbankz, it’s expected that dropshipping market valuation will reach up to $557.9 billion by 2025. And about 27% of eCommerce stores are dropshipping stores.
So if you ever hear someone say that dropshipping isn’t viable in 2022, they are lying and exaggerating the problems!
Pros & Cons of Dropshipping
Now that you know that dropshipping isn’t going anywhere, you might be interested in starting your very own dropshipping store. While I don’t want to be the bearer of bad news, I suggest you not get too hasty!
That’s because dropshipping isn’t a business model that works for everyone. It has many incredible benefits and flaws. So instead of starting now, you should first evaluate the pros and cons and then see if this business model is made for you! Let’s start with the positives first!
Pro #1 - Low Cost to Entry
The first and most obvious reason why to start a dropshipping business is that it’s extremely low costs of starting. All you need is money for a website, and you are good to go.
However, while that might mean you could start with just a hundred dollars in your pocket, it doesn’t mean you shouldn’t. That’s because you’ll be starting from zero! That means you’ll need to promote your business heavily before seeing a profit.
So I at least recommend you to be ready to spend about a thousand dollars during your startup so you’ll have enough money to create Facebook ads.
But at the same time, it’s still cheaper than also having to have money for inventory and a warehouse.
Pro #2 - Ability to Follow Trends
Another great benefit of the dropshipping model is that you can catch different trend waves and profit from them during their height. Since you don’t have any inventory, you don’t need to wait weeks to fill your inventory and then start selling.
Instead, all you need is 30 minutes, and you’re good to go. So you can quickly follow trends and see your sales skyrocket.
Pro #3 - Easily Test Out Products & Expand
The speed of being able to sell trendy products has another benefit; it helps you to test out your products quickly and expand. And that’s a great thing.
That’s because, with this, you can quickly and cheaply test out your business ideas and see if the markets are actually interested in your products. All you need to do is add the product to your online store and see if it sticks.
If it does, then congratulations, you’ve found your market and product. If not, that’s okay. The only money you lost is some marketing costs! That means you can just test out another product instead of having to find a way to sell your unwanted products.
Pro #4 - Low Maintenance Cost
And lastly, dropshipping has relatively low overhead costs. The only thing you probably need to pay is the website related. That means your hosting and domain.
That’s way less than an average eCommerce store that needs to also pay for warehouse expenses, electricity, and much more.
Pro #5 - Ability to Grow Your Business Fast
One of the best benefits of using dropshipping is the fact that you can grow your businesses extremely fast. No longer do you need to:
- Open new warehouses in new locations,
- Spend tons of money and effort on product development
- Stock your inventory to start selling.
Instead, you only need to do some product research, add it to your store, and you’re done. You can also expand to other markets quickly by just advertising to new countries or interest-based people.
So as you can see, there are a lot of pros to starting your dropshipping store. However, just like there are positive things about dropshipping, there are some flaws you should know about this business model as well. Here are three of them:
Flaw #1 - Extremely Competitive
With pros like a low cost of entry and the overall low risks the business comes with, many people find this business model attractive! And that’s the biggest problem with it. You’ll have a lot of competitors!
And since you and your competitors are selling the exact same product, you’ll likely get into price wars! And that’s not a place you want to be.
So instead, you’ll have to find another way to stay competitive, like better service.
Flaw #2 - Low Margins
While we told that average dropshippers make 50% more profit than usual eCommerce stores, that doesn’t mean you’ll have high margins. Most dropshippers only have 20% margins.
That means if you’ve earned about $1000, you probably will only get a measly profit of $200. So be sure to have realistic expectations when it comes to your revenue.
Flaw #3 - Almost No Quality Control
Since the product you’re selling isn’t yours, there is no way to guarantee an excellent experience for your clients. That’s because you’ve got no control over the quality. You don’t really know how well-built your product is! And even worse, there’s nothing you can do to improve it.
So to counteract that, you could do a couple of things:
- Check the Reviews - One of the easiest ways to see if the product is worth selling is to check if the supplier’s customers are mostly satisfied. If they are, you probably have a decent product at your hand.
- Buy a Sample for Yourself - Sometimes, the best way to know if you’re selling a great product is to buy it yourself. That way, you can feel the quality yourself and take pictures of it to make your business look more legit.
Flaw #4 - Problems With Legal Liability
Another problem with starting a dropshipping business is that your supplier might not be as innocent as they seem. The thing is, it’s not too uncommon for some suppliers illegally use a trademarked logo or another company’s intellectual property.
And since you’re selling it as a dropshipping product, you’ll also get into trouble. So to counteract that, you can do two things:
- First, look at what product you’re selling and if it looks similar to some products. If so, it’s best to avoid them.
- Additionally to researching the product, you should also create a solid Dropshipping Agreement Contract.
Flaw #5 - Difficult to Brand Your Company
Branding is one of the most important aspects of any successful business. With it, people will recognize your company and make them choose you when thinking of buying products.
However, since you’re reselling products from your supplier, building a brand is extremely difficult. There are no logos on your packaging or the product itself.
So, if you want to brand your company, you’ll have to think outside of the box and give them an experience worth remembering. For example, it would be great if you create consistent blog posts and make them as valuable as possible.
Your potential customers will continue reading your content, making it easy to remember your company when they get your ads.
Is Dropshipping Worth it?
You know the definition of dropshipping! You know that it’s still profitable and the pros and cons of running one. However, you’re still not convinced if dropshipping is worth it! If that sounds like you, then we might have the answer for you.
In our opinion, dropshipping is still a viable option! However, it’s not made for everybody! If you’re just a beginner and looking to build your first online business, I don’t recommend you start with it.
While the business is low-risk, if you want to be profitable with it, you’ll need many skills like copywriting, market research, and more to make it work. Plus, you’ll have to put a lot of money into marketing before the business starts making money profitably.
So if you’re just starting out in online businesses, I recommend you first try out freelancing, as it helps you start developing good skills and earns you money without putting hundreds of dollars into marketing.
But for who does dropshipping work?
Well, we recommend this business model for those who already have the necessary skills and money to burn. So if that’s you, then you can start building your brand now. However, if you do, don’t make dropshipping a long-term business, as it won’t work for it.
Instead, it would be best to use it as rocket fuel for creating an eCommerce brand. That way, you’ll find your market and products quickly. And once you’ve got them, you can either start reselling the products through a fulfillment center or start selling your own products, helping you escape the price wars and other dropshipping issues!
Is Shoplazza Right for Your Dropshipping Business Venture?
So you’ve decided that you’re looking to start a dropshipping business! That’s awesome, but you’re going to need to build a tremendous dropshipping website for this. That’s because your website design has an integral part of your client’s first impression.
So if you’re looking to do just that, Shoplazza has you covered. With us, you can choose from multiple modern-looking themes that make your customer’s jaw drop! Additionally to that, we have made it extremely easy to start dropshipping.
That’s because we have built-in dropshipping apps like CJDropshipping and HyperSku, which enables you to start selling dropshipping products without a hassle. You’ll be able to add products and fulfill them, all in a seamless manner.
So as you can see, Dropshipping isn’t dead at all. With the expected market value of 557.9 billion, almost anyone can start their dropshipping venture and start making six figures each year.
So why not start your journey? You could do that by taking the first step to creating your online store! Click here to get a 7-day free trial!