Is dropshipping a good idea? This is a question many people ask when thinking about starting an online business through dropshipping, and it’s a reasonable question. When you find out that you can begin an online shop within hours without keeping stock or managing a physical store, you become a bit doubtful.
In this article, we explore the dropshipping business model by discussing all the advantages and disadvantages you should be aware of.
Is dropshipping a good idea? Why do many people find it worthwhile?
Let’s start with a couple of statistics. As per Statista, the worldwide market for the dropshipping industry is predicted to increase to more than $400 billion by 2026. This aligns with the growing trend of dropshipping over the years, as indicated by Google Trends. However, is dropshipping a good choice as an online selling method?
The dropshipping approach is a different way of doing online business compared to the usual online retail. Instead of creating and keeping your own stock, you let a supplier handle and ship the orders directly from their warehouse. In a dropshipping business, you compensate a supplier to manage the order fulfillment process from their warehouse.
This process is automated using applications for your online store, like linking your Shopify store to a dropshipping platform such as AliExpress through Spocket. You can use Spocket to bring AliExpress products into your Shopify store.
After you create your product pages, set up the rest of your site, and finally launch it, any order placed goes to your dropshipping supplier. They will send the order automatically to your customer and handle returns as well.
This is why dropshipping is beneficial for many businesses, especially startups. You can start an online store today with minimal cost, but what’s the catch? We will look into this article. Without further delay, let’s go through our list of advantages and disadvantages of dropshipping.
Is dropshipping a good idea? Advantages and disadvantages
Pros of dropshipping
1. Pay only when you make a sale.
2. Try new products easily.
3. No need to handle inventory.
4. No requirement for a physical store.
5. Work on your own schedule.
6. Expand your business as quickly as you like.
Cons of dropshipping
1. Returns can be confusing.
2. Smaller profit margins.
3. Can’t watch over the shipping process.
4. Customer service can be tricky.
5. Limited control over pricing.
6. No authority over quality.
Dropshipping pros
1. Pay only when you make a sale.
When you explore dropshipping websites like AliExpress, the prices you view are the prices you’ll pay when a customer purchases something from your store. Because you don’t handle orders personally, and suppliers fulfill them only when they get them, you don’t spend money on those prices until you make sales.
This means you only spend money on products after you’ve sold them. You make a profit by selling products, just like in regular retail. Consider this gel nail polish priced at $4.77 per bottle (on sale).
If we list it in our dropshipping store for $14.99 and a customer buys it, we’ll get $10.22, and the supplier will get $4.77. In traditional retail, we’d have to buy that bottle first and then sell it. This is why dropshipping is considered a profitable way of doing business.
2. Try new products quickly and easily.
This is a significant extra benefit of not having to purchase your inventory upfront. If the items you’re selling right now aren’t doing well, you can simply take them off your store and bring in new products from your dropshipping supplier.
This lets you try out new products and a variety of items with very little risk. For example, if you’re currently selling gel nail polish in only five colors, you can consider adding every color your supplier offers to your product page.
Even better, try introducing a different style of nail polish to your store or add related products like nail polish remover and nail care items. You can also mix this approach with new marketing tactics to experiment more and potentially discover your next popular product.
3. No handling of supplies.
Not only do you avoid paying for inventory upfront, but you also don’t have to stress about finding a place to store it or managing it. Your dropshipping suppliers take care of all that for you.
In traditional retail, you’d have to keep tabs on your stock levels and order more before running out. With a dropshipping business, if something is out of stock, you can easily switch suppliers with a few clicks. Your main task is to keep an eye on how much you’re selling for each product and its variations.
This helps you know what’s working, which products need improvement, and what you should remove from your offerings. Overall, not having to manage inventory is a significant advantage of dropshipping.
4. No store required.
This is a big benefit of online selling in general, and it’s just as important for dropshipping businesses. You don’t have to spend money on a warehouse to keep goods, and you don’t need to worry about finding money for a physical store.
All you need is a website that can handle dropshipping. This could be any website, but online store platforms like Shopify and WooCommerce make it much easier to set up. However, you’ll still face the same challenges as you would with a regular store.
You need to attract customers to your site and make sales. You’ll also have to pay for hosting and designing your site, but these costs are still much lower than running a physical store.
5. Adjustable work hours.
The online selling method offers flexibility with your work hours. In traditional stores, you have to be there to make sales. While vending machines and self-checkouts exist, they don’t suit all stores. With an online shop, customers handle their purchases, so you don’t have to worry about theft.
But even with online selling, there are many tasks to handle daily. You and your team need to manage stock, send orders, and handle returns. Plus, you have to deal with customer service issues. It can feel like a full-time job with extra hours. Now, add dropshipping. Suddenly, you have fewer tasks to handle daily.
You don’t need to track stock or send orders. This gives you more time and lets you work from almost anywhere, except when you need to answer customer service queries quickly. That’s the kind of freedom dropshipping offers.
6. Expand your business as quickly as you wish.
In regular stores and online shops, you and your team have many tasks to do every day, and most need to be done quickly. We talked about this before. But we didn’t talk about how these tasks can slow down your business growth.
If your products are selling well, you might want to get more products and add them to your store along with what you’re already selling. This means you’ll need more space for your store, warehouse, and more employees to handle all the extra work.
But with online selling and dropshipping, you don’t need a physical store, warehouse, or to handle orders. So, you can add lots of new products to your store without worrying about extra costs, except for hosting fees.
That’s why dropshipping is one of the best ways to grow your business easily.
Dropshipping Cons
1. Returns can become complicated.
When you use various suppliers worldwide, handling returns becomes complex. If a customer orders items from different suppliers and wants to return them all for a refund after 15 days, following each supplier’s return policy becomes essential.
Dropshipping stores must align with their suppliers’ return policies. If a supplier allows returns within 60 days, the store must adhere to the same timeframe. Dealing with multiple suppliers in a single order complicates the return process, requiring separate shipments for each supplier.
Some dropshippers simplify returns by setting up PO boxes, consolidating returns in one shipment, and then managing the product returns individually to recoup costs. Others may allow customers to return products directly to suppliers, but this can be intricate, especially with multiple suppliers involved.
To avoid complications, it’s advisable to understand and consider suppliers’ return policies before starting to sell. Working with regional suppliers can also streamline the return process.
2. Smaller earnings or profits.
Reducing the amount of money you make on each sale is a way that dropshipping can end up costing more compared to regular retail and online selling methods. In dropshipping, you buy products only when customers place an order. This implies you’re purchasing each item individually.
This removes the option to get discounts for buying in large quantities and reduced shipping costs. Instead, you’ll be paying for shipping separately for each item, rather than having a single shipping cost for a large order.
Some online sellers who use the dropshipping method also offer well-known brand products. Even though they’re selling products from another company, these items are sent from a different supplier.
Yet, this supplier provides an option where the seller can put their own brand on the product. This comes with an additional fee, usually applied to each item.
Even though you have the freedom to set any price for these products, you might need to set them significantly higher than what your competitors are charging to cover the extra expenses.
3. Can’t monitor the shipping.
Let’s talk about an order example from the first thing on this list. A customer bought six things, but they’re coming from three different places. That means the customer will get three separate packages for one order. It’s not uncommon in online shopping, but it can be a hassle for customers.
If you handle stock in your own storage place, you can deal with this kind of order in one spot and send all six things in one box. You also get to pick who delivers your stuff.
With dropshipping, you use the delivery service your supplier uses. It might be the US Postal Service, or it could be something you’ve never heard of. This is just one part of dropshipping where you don’t have any say.
4. Customer service can get complex.
Customer service becomes more complicated when you don’t handle your own inventory and shipping. Since you’re not directly managing these tasks, you end up in the middle when customers face issues with their orders.
For instance, if a package goes missing during delivery, the customer reaches out to you. But you have to then contact your supplier or their delivery service before updating the customer. This setup leads to customer service that’s far from convenient for your customers.
5. Limited control over pricing.
We’ve talked about not having access to big discounts or shipping deals when you dropship. This is just one reason you can’t control prices much in this business. Since you don’t create your own products like some stores do, you can’t control if suppliers raise prices for what you sell.
Yes, you can pick your prices, but that $4.77 nail polish might become $7 without notice. If you use brand-name items, your supplier can also charge more whenever they feel like it.
6. No power over product quality.
The last downside of the dropshipping method comes from not physically handling the products you have in your store. If you’re not creating your own products and you follow this approach, you can’t manage the quality of the items you’re selling.
That’s why it’s important to check reviews and sales information on dropshipping platforms such as AliExpress.
Best platforms for dropshipping.
Is it hard to begin with dropshipping? Nowadays, not really. Many platforms can help make it simpler. Firstly, you’ll need an online store to sell the products you want to dropship. Shopify is a commonly used online selling platform, and it’s particularly great for dropshipping stores as it works well with other platforms that automate the dropshipping process.
For Example: The Spocket app simplifies linking a Shopify store to AliExpress, effortlessly bringing in products and their data. You can also link Spocket to various well-known platforms such as BigCommerce, Wix, Squarespace, WooCommerce, and others.
Is dropshipping worth it? The final decision.
Is dropshipping worth it? That’s your call. With a growing market and inevitable competition, the profitability of dropshipping shouldn’t be a major concern. Let’s focus on the essentials. Dropshipping is the most affordable way to launch an online store. If you lack substantial funds for inventory, it’s the ideal starting point.
It provides the flexibility you crave in a career. All you need is a computer, internet, and a phone to kickstart and manage your dropshipping business. Work from anywhere, anytime.
When assessing if dropshipping is worth it, consider if you’re ready for its challenges: dealing with returns, acting as the intermediary between customers and suppliers, and relinquishing some control.
While there are solutions, if you’re not prepared to tackle these issues head-on, exploring other business ventures might be wise.
