You are not alone if you are thinkingdropshipping.
According to Google Trends, searches for “dropshipping” reached an all-time high at the start of 2020.
Dropshipping means that you list the products for sale on your website.
A third party manufactures and maintains the products.
When a customer orders from your website, the third-party supplier ships it directly to the customer.
It may appear to be a silly idea to set up an online store and not have to deal with production, warehousing, or fulfillment requests.
And the success of well-known dropshipping brands such as petboutique makes it even more appealing to everyone.
But is dropshipping worth it?
Let’s look at some of the pros and cons to help you make the best decision for your business.
1. Low Cost to Start
Both traditional and online stores commonly require significant financial investments in order to develop and manufacture products. One of the biggest expenses for any new store is the cost of storing products and marketing to new customers!
Dropshipping, on the other hand, does not necessarily require a large investment because you do not need to worry about developing new products or purchasing warehousing.
2. There is no Need to Store Products.
Traditionally, retailers pay upfront for production costs, then wait for delivery before stocking the products in a store or warehouse.
Sales will be lost if the product is not available to customers when they want to buy it.
Inventory management also requires storage and handling costs – for example, someone must fold shirts and place them on the shelves!
You may purchase or manufacture large quantities of inventory that will not be sold, facing significant financial risk.
Dropshipping businesses, on the other hand, minimize those risks. When a third party manages the inventory, the products are available to the customer when they make a purchase.
3. There is no Need for a Physical Store.
Drop shipping eliminates the need for a physical storefront, which means there is no need for a rental, mortgage, construction costs, or maintenance.
4. Increase Profitability
Typically, retailers purchase products, then wait for them to arrive before selling them to customers. Because they spent a large amount of money and were unable to recover it.
Dropshipping allows you to receive payments for products at the same time you can pay the supplier. This quickly frees up funds.
5. Risk-free Testing of New Products
Innovation is essential for customer retention, but many business owners are hesitant to invest in new products because they are afraid of losing money.
Dropshipping allows you to experiment with new products without investing a lot of money. If your customers dislike the new product you’re experimenting with, simply remove it from your store.
6. Passive Income
It is possible to earn a passive income with little or no daily effort (although it requires upfront work and constant monitoring).
And, with dropshipping, you can work on other aspects of your business while orders are placed and automatically fulfilled.
However, under the traditional retail model, products cannot be distributed without your direct supervision.
1. High Competition
Dropshipping is a profitable business because of the low start-up costs, but it also creates fierce competition.
You’ll find that other retailers don’t carry the same products, but they do have similar products manufactured by the same third-party suppliers.
In order to compete, you’ll have to create new ways to stand out.
2. A lack of control
Because you don’t own any inventory, you can’t check to see if the products are in good condition before shipping.
If you don’t have quality control, you’re putting your company’s name at risk.
Customers may be dissatisfied and sales may be lost if a supplier or third party ships out defective products.
Without a special agreement with your suppliers, it’s impossible to customize your brand packages and postcards or use interactive packaging to make your store unique, offer coupons to boost additional purchases, or include thank you cards to make customers happy.
Arranging exclusive deals with suppliers becomes possible as your business grows and your reputation grows.
However, until that time comes, your profit margins will be less favorable, and increasing fees might soon wipe out earnings or push you to raise product prices so high that your customers will no longer be able to afford them.
3. Wholesale discounts
One of the reasons traditional commerce is so successful is that it sells products at low prices and has a large inventory.
They get large discounts on products because they buy in bulk, and they price them very competitively in the market.
Because you’re buying the products one at a time with dropshipping, you can say goodbye to any discounts on any product you sell from the supplier.
You pay what the suppliers ask because you don’t own the product until you make enough sales to have some negotiating leverage.
4. Orders at random
If your store sells a variety of products, they may be shipped from different suppliers.
Customers may receive multiple boxes for the same order, leading to high shipping costs, wasted packaging, confusing branding, and customer discomfort.
How to make your store work for you
Choosing the correct products and suppliers is the first step to success in dropshipping.
As does poor packaging or delayed delivery. It’s worth the extra effort to properly investigate all the best suppliers.
Dropshipping is a business that relies heavily on marketing, branding, and customer service.
Make your store stand out by building a unique brand and providing excellent customer service, rather than depending solely on price.