Dropshipping has an estimated worth around $162.44 billion, and thanks to its flexibility and accessibility, it’s an excellent venture for wannabe entrepreneurs. Although often portrayed as a get-rich-quick, minimal hassle scheme, it is not. Instead, it involves as much dedication, thought, and ingenuity as any other eCommerce business. That said, what exactly are the pros and cons of dropshipping? Let us take a look.
What Is Dropshipping?
Before we go any further, let us ensure we are all on the same page. Dropshipping is when a merchant purchases the products they want to sell from a third-party supplier. They then store and ship them directly to the customer. In effect, a dropshipping company acts as a middleman, so, unlike the traditional retail model, the seller does not own any inventory upfront. Instead, they purchase stock from a third party only when their customer has paid for his/her item(s).
Dropshipping is a legal and increasingly popular business model that allows entrepreneurs to open an online store without the need for significant initial investments in inventory. This model involves selling goods directly to consumers without any inventory, since orders are carried out by third-party suppliers. The low barrier to entry, reduced overhead costs and the ability to offer a wide range of products make dropshipping an attractive option for many businessmen around the world. Despite some challenges, such as managing supplier relationships and ensuring quality control, many successful e-commerce businesses have proven the viability and profitability of dropshipping as a sustainable business strategy.
The Pros and Cons of Dropshipping
With what we have just said in mind, let us explore some of the most notable pros and cons of dropshipping. First up, the benefits:
It’s Easy to Get Started
Even when it comes to eCommerce, setting up shop can be a lengthy and stressful ordeal. However, dropshipping eradicates a lot of the hassle, as you do not have to worry about storing and shipping the products yourself. It also means you do not have to worry about the following:
- Ordering stock;
- Tracking inventory;
- Managing stock levels;
- Handling inbound shipments and returns;
- Packing and shipping items; and
- Paying for and managing a warehouse or finding space to store inventory.
Low Overheads and Upfront Costs
As indicated above, you do not have to pay for warehouse staff or space to manage and store your inventory. Needless to say, this is a huge money-saver. Not only that, but because you do not have to purchase stock, it is possible to launch your eCommerce store with minimal funds.
In fact, if you use WordPress’ free framework, all you need are a web domain and hosting to get started. Typically, a custom domain sets you back around $10 a year, whereas hosting starts as cheap as $3 per month. Dropshipping supplier platforms like Spocket are also available. In fact, Spocket’s product catalog is free to browse, but to start selling, you need to opt into their Starter plan for $24.99 per month. However, as you see, starting out does not have to be expensive.
Minimal Risk
It is also worth highlighting that dropshipping involves minimal financial risk. You do not need to purchase products until you make a sale and your customer pays for it. As such, you will not lose out if you misjudge your target audience or product offering the first time around. Therefore, if a product does not sell well, you simply drop it and try something else without worrying about wasting funds on inventory.
Location Freedom
With a dropshipping business, you run your online store from just about anywhere, as long as you have an internet connection. This not only gives you location freedom, but also massively reduces your overheads.
Take Mark Chapon, for example. He started selling dog tags using Spocket and made $178,492 in his first year, enabling him to quit his 9-5 job to work comfortably from home.
Access to a Wide Product Selection
As you do not have to purchase inventory upfront, there is no reason why you cannot offer countless products on your eCommerce store. Typically speaking, dropshipping platforms like Spocket offer thousands of products to from which to choose.
Top Tip: It is wise to focus your energy on trending items, as these are the most likely to turn the quickest profits. Spocket makes it easy to find trending products. They even have a product category dedicated to trending items.
Easier to Scale
Like any business, growth always leads to additional work, especially regarding customer support and relations. Still, scale your business with fewer growing pains by utilizing dropshipping. When you are ready to release new products, all you have to do is import a new selection to your store. You do not need to spend ages finding the right supplier, risking a large investment, or finding premises to store more inventory. The process is the same, no matter the scale at which you operate.
The Drawbacks
Now that we covered the benefits of dropshipping, let us turn our attention to some of the pitfalls:
- With dropshipping, product quality relies solely on your supplier. To mitigate this, Spocket makes it easy to order sample products from prospective suppliers so that you conduct your own quality checks.
- Typically, profit margins are smaller than selling your own products when you dropship. This is the trade-off you pay for not purchasing and warehousing inventory upfront.
- Some dropshipping suppliers make refunds and returns unavailable or more complex, and this makes it harder to control your customer experience. However, when you work with a dropshipping supplier platform like Spocket, the platform reserves the right to overturn these policies to assure quality service.
Is Dropshipping Right for You?
Now that we explored the pros and cons of dropshipping, is this the right business model for you? In short, if you are looking to launch an online business with little capital and fewer risks, dropshipping is undoubtedly worth considering. It is a simple, inexpensive way for anyone looking to dip their toes in the waters of eCommerce and get a feel for a potential target audience and best-selling products.
So, is dropshipping the right move for you? Tell us your thoughts in the comments box below!
