Dropshipping has exploded in popularity over the last decade as an accessible business model for aspiring entrepreneurs. But many still wonder – is dropshipping actually worth it?
In this comprehensive guide, we‘ll break down everything you need to know about dropshipping in 2024 so you can decide if it‘s right for your ecommerce ambitions.
What is Dropshipping?
Dropshipping is a retail fulfillment method where store owners do not actually keep the products they sell in stock. Instead, when a store sells a product using the dropshipping model:
- The store owner purchases the item from a third party supplier or manufacturer
- The supplier or manufacturer then ships the product directly to the customer
- The dropshipper retains the profit margin between their selling price and the wholesale price they paid the supplier
This allows online sellers to run lean operations without investing capital into inventory. Products only get ordered from suppliers once customers place orders.
Dropshipping appeals especially to new ecommerce store owners because it lets them test product validity without large upfront inventory investments. It helps mitigate risks that come with traditional retail models that require buying stock.
Now let‘s dive into the biggest pros and cons of running a dropshipping business so you know what you‘re getting into.
Dropshipping Pros
Low Startup Costs
Opening a traditional brick-and-mortar retail store often requires hundreds of thousands of dollars or more in startup capital. An ecommerce store with purchased inventory isn‘t too far behind cost-wise.
Conversely, a barebones dropshipping store can get up and running for less than $100 if you handle your own branding and use Shopify‘s free trial. Even including Shopify‘s $29+ paid plans, custom branding, advertising budgets, web hosting, and other startup costs, you can launch a dropshipping store for under $1000.
For the capital required to open one physical retail location, you could build multiple profitable Shopify dropshipping stores testing an array of winning products.
Easy Scalability
Scaling a traditional retail business requires purchasing more product inventory, expanding storage space, hiring staff, and setting up additional physical storefronts. All this adds operational overhead and execution risk trying to handle bigger volumes.
Meanwhile, a properly setup dropshipping store can scale to handle significantly higher order volumes without major changes. You don‘t have to purchase and hold any extra inventory. The suppliers do it for you.
Even as order volumes grow into hundreds or thousands per day, you may only need to hire some extra virtual assistants to help process orders. The business can scale exponentially with minimal incremental effort due to outsourcing fulfillment.
No Inventory Overhead
Owning and storing inventory creates hefty operational overhead. Firstly, you need to lease out and maintain storage space. Second, you take on inventory risk having to discard unsold goods. Storing inventory also requires dedicated staff and infrastructure to handle stock intake, organization, fulfillment and more.
By leveraging dropshipping suppliers to house and fulfill all inventory, ecommerce entrepreneurs bypass these costs. They don‘t incur expenses to store or handle any products until after the sale is made.
Location Independence
Another fantastic benefit is there‘s no geographical restrictions on where dropshipping entrepreneurs can operate their businesses from. All aspects of order processing, customer service, marketing and finances can be handled remotely.
As long as you have a way to access the internet, you can manage a global dropshipping empire from anywhere with a laptop and phone. Want to run your business while traveling full-time? No problem!
Wider Selection of Niche Products
Launching niche stores that specialize in a specific product category have great appeal because the focused targeting draws in motivated buyers ripe for conversion. However niche products often have limited supply chain availability at retail levels.
Dropshipping opens up access to vast arrays of unique products in almost every conceivable niche. Nearly any manufacturer able to ship individual units can integrate as a dropshipping supplier. This effect expands selection diversity across all niches.
Dropshipping Cons
Of course, dropshipping isn‘t all rainbows and butterflies. There‘s some core disadvantages to the model you need to consider too.
Low Profit Margins
After wholesale supplier rates, platform selling fees, advertising costs and other expenses, profit margins can be quite slim in dropshipping. Making meaningful income requires pushing substantial order volume.
Carefully researching suppliers and concentrating conversions helps. But typically profit margins range around 15-30%. Comparatively, wholesaling or private labeling products often produces 40-80% margins.
Little Control of Shipping Experience
Since third party suppliers handle storing, packing and shipping each order, dropshipping store owners have very little visibility or control over the logistics process. This leads to a few complications.
Firstly, the shipping speed and packaging quality often depends on whichever freight service the supplier uses to dispatch orders. These details can negatively impact customer experience.
Second, inventory inaccuracies can occur if suppliers don‘t keep stock levels up to date. This leads to overselling out-of-stock items which harms stores. Integrating inventory management software helps avoid these issues.
Complex Returns & Refunds
Managing returns and issuing refunds gets complicated with dropshipping. When a customer returns an order, the store owner must facilitate returns back to potentially many different suppliers across a single multi-item order.
You also have to handle returns and refunds according to each supplier‘s unique policies. This complexity versus streamlined single-supplier orders creates additional customer service work.
Limited Brand Control
Another catch is dropshipping stores don‘t fully control the product branding experience since third-parties pack and distribute each order.
For example, suppliers may include invoices, packaging slips or other attachments mentioning their business with shipped orders. This distorts the customer experience you aim to create under your store‘s brand.
Strategic suppliers who agree to generic packaging without invoices or branding mentions help you retain control of your brand image. But these special dropshipping arrangements tend to bring higher product costs.
You have to weigh extra margins against the branding experience you provide.
Is Dropshipping Ultimately Worth It?
Despite some difficulties surrounding margins, logistics communications and branding control, the simplicity of starting a self-sustaining dropshipping business still outweighs the alternatives.
Dropshipping continues growing exponentially year-over-year because its flexibility empowers nearly anyone to run their own commerce business on the side or as a full-time job.
You skip the risky parts of owning physical retail spaces or needing heaps of capital just to launch. As long as you apply strategies around branding, product research, marketing and customer experience, dropshipping provides exciting potential.
How Can You Improve Your Dropshipping Success?
Here‘s some quick tips to help maximize results as a new dropshipping entrepreneur:
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Vet Suppliers Rigorously – Carefully assess potential suppliers on cost, locations, product quality, reviews and fulfillment reliability before adding their inventory. Poor suppliers destroy customer happiness.
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Focus Your Niche – Highly focused stores outperform generalists by speaking directly to a specific audience interested in your narrow niche. Find underserved passion points.
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Create Excellent Content – Build an audience and position yourself as an expert by creating content like blog posts, videos and guides around your products. Offer generous value.
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Leverage Influencer Marketing – Partner with relevant social media influencers, bloggers and celebrity endorsers to showcase your brand to their engaged audiences.
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Offer Superior Customer Support – Given the potential complexities ordering through multiple suppliers, make customer satisfaction a top priority to keep business growing via word-of-mouth.
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Keep Testing & Optimizing Funnels – Continually test advertising channels, sales copy, email funnels, special promotions and website improvements to incrementally boost conversions.
While running any internet business presents challenges, dropshipping provides such an easy, flexible foundation to start on that it beats most alternatives. Just apply these tips and you‘ll avoid the biggest hurdles.
Best eCommerce Platforms for Dropshipping
While you can technically create a dropshipping store on most popular ecommerce platforms, some solutions provide more built-in features and tools tailored to succeeding with dropshipping operations.
After extensive testing and research, here‘s my top recommendations:
#1 Shopify
Shopify powers over 1.7+ million merchants with its robust cloud-based solutions specifically for operating all types of ecommerce stores.
Their ecosystem gives entrepreneurs everything needed to build and customize beautiful online shops. You gain access to hundreds of professional themes alongside drag-and-drop design functionality for crafting world-class storefronts.
Shopify also offers easy built-in integration with the popular Oberlo dropshipping app. This lets you effortlessly import products for your Shopify store catalog direct from Oberlo‘s network of suppliers and wholesalers.
Another perk is Shopify‘s top-tier traffic, marketing and search analytics. This intelligence helps you optimize conversions.
Hands-down Shopify provides the best all-around package for starting, running and scaling a successful dropshipping empire.
Learn more about using Shopify for dropshipping.
#2 WooCommerce
If you already operate a WordPress site, I recommend checking out WooCommerce to power your dropshipping venture.
WooCommerce helps convert existing WordPress blogs and sites into fully-functional online stores. As an open-source WordPress extension, it delivers incredible flexibility to build customized stores.
My favorite aspect is the WordPress ecosystem integration. There‘s plugins and support for everything from automated order processing to accounting. Lots of dropshipping tools cater specifically to WooCommerce stores too.
For dropshipping entrepreneurs already leveraging WordPress, using WooCommerce as your storefront provides a streamlined experience.
Learn more about how to use WooCommerce to start dropshipping.
Conclusion
Implementing a smart blended strategy leveraging the pros of dropshipping while minimizing the cons leads to a hugely prosperous online business that can grow exponentially.
The low barrier to entry and setup simplicity allow you to get started right away and remain flexible. By focusing efforts on branding, funnel optimization and high-quality support, your dropshipping store can dominate.
Now that you know what it takes, are you ready to live the ecommerce dream?
