There are a number of advantages of a dropshipping business, but there are downsides as well. Let’s take a look at the advantages and disadvantages of a dropshipping business and the best ways to overcome dropshipping challenges and succeed in this field.
Advantages and Disadvantages of Dropshipping Business
Dropshipping is a form of retail business where the store does not actually keep the products it sells. Instead, when a retailer sells a product they display on their website, they buy the item from an outside supplier who then ships the item directly to the end customer.
Therefore, the drop shipper never sees, holds, or ships the item, but rather effectively advertises it to the supplier and markets the price of the product so that he can make a profit.
Dropshipping is attractive to beginners because it is a low-risk and low-investment way to start your own business, and thus does not feel like a big gamble.
The ability to instantly introduce new products or stop selling slow-moving products is one of the main benefits of dropshipping.
For someone who expects amazing profit margins, this business model can be disappointing. If profit is your primary concern, you’d be better off going straight to the source – like manufacturers – but manufacturers don’t always facilitate dropshipping.
Since dropshipping profit margins are significantly lower compared to other business models such as manufacturing and wholesaling, dropshipping probably doesn’t bode well with a new brand, as the company doesn’t have ultimate control when it comes to customer satisfaction through brand awareness and brand experience.
In this article, we will highlight the advantages and disadvantages of a dropshipping business.
What are the Pros and Cons of Dropshipping?
Dropshipping business is a double-edged sword. It offers the opportunity to quickly and inexpensively create an online store and sell products without ever actually stocking the items themselves, this system also has some limitations and drawbacks. Let’s have a look at the pros and cons of dropshipping.
Pros of Dropshipping
Dropshipping is the practice of shipping products to customers on behalf of the retailer.
Dropshipping is a great business idea for entrepreneurs who want to start their business with limited capital, because it is easy and simple, and it allows testing many different online business ideas quickly, without much risk, and thus allows them to learn how to choose and market popular products.
Do you want to start your dropshipping business? Let’s have a look at the benefits of the dropshipping business:
Low startup costs:
The biggest advantage of dropshipping is the ability to launch an online store without having to invest thousands of dollars in stores, as traditional sellers usually have to spend a lot of money on buying products and putting them in stores.
To set up a traditional business, you need resources for some basic aspects such as investments, market setting, warehousing, and of course the items you will sell. But for dropshipping, you only need capital to run your website. So it reduces all the extra expenses and thus saves a lot of money.
Easy to get setup:
Dropshipping is gaining many pros, but the main one is that it’s easy to get started. Running an online store is much easier when you don’t need to deal with products in real life. Dropshipping works in the following steps.
- Set up your website so that consumers can buy from it.
- Find a third-party supplier for your goods.
- Marketing of products.
Dropshipping reduces startup risks because even if your business plan doesn’t work out the way you expected, you don’t have to worry about expenses. After all, the only thing you have invested in is creating your own eCommerce website. In dropshipping business, you don’t need to worry about any of the following:
- Warehouse management and payment.
- Packing and shipping orders.
- Follow-up stores from the accounting side.
- Dealing with returned products, and pending shipments.
- Continuously order products to maintain stock level.
Flexibility and wide array of products:
Dropshipping gives you the flexibility to choose your workplace. You also have flexibility over which products you can select to sell.
Dropshipping companies don’t have to be limited to a limited selection of products. They are flexible to add as many products as they want to their list so that consumers have a wide range to choose from. It won’t create any problems for the retailer either.
You can always add new products to your list on the website as it does not require investment before selling. The other advantage is that you have a reasonable shipping fee because you don’t have to pack and ship the products yourself.
Dropshipping also leads to another advantage which is that it reduces the chances of damage and its expenses. The products are exported directly from the retailer and do not have to go through different media, which reduces the risk of loss.
Low overhead costs:
Dropshipping has lower overheads, as you don’t need to buy, stock, and manage products. In fact, many successful dropshipping store owners run their businesses from home, so the business only requires a good internet connection and a laptop or any device on which you can run your website. Of course, the costs may increase as the company grows, but they remain low compared to other traditional companies.
If you are going to set up a traditional small business, this will include some additional expenses such as store rent, electricity bill, storage room rent, and internet usage bills. On the other hand, in dropshipping, you cut all of these things and just spend on the site.
The dropshipping business does not require people to do a lot of work. Product packaging and delivery to customers are managed by third-party suppliers. So it becomes hassle-free. It also allows you to continue introducing new products on your website.
Cons of Dropshipping
All the advantages we mentioned earlier make dropshipping a very attractive option for anyone looking to launch an online store, or looking to expand their offering of products, but drop shipping also has some drawbacks that should be taken into account. Let’s take a look at some of the limitations and drawbacks of the dropshipping business.
Low-profit margins are the biggest drawback of dropshipping, the ease of entry and low overhead means there are many competing stores selling products at very low prices in an effort to make a profit.
Dropshipping is a viable business model for many because of its low barriers to entry, but that means a lot of people are doing it. The competition is intense and it’s hard to build your brand online and make a name for yourself.
Well, the reason is that there is less investment, more entrepreneurs tend to create a website. Then only in order to increase customer engagement and sales, they sell the products at the lowest possible price.
The drawback of these sites is that they have unsatisfactory customer service. But new customers who make a purchase from websites for the first time will make a comparison between both websites.
Tracking inventory can be tough:
When you stock your products yourself, the process of keeping track of incoming and outgoing products is fairly simple, but when you import products from multiple warehouses, to fulfill different orders, your warehouse status will change constantly.
Dropshipping is hassle-free if you ship the goods directly from the supplier. But it can be a nuisance. This is because you are getting orders fulfilled by many suppliers. Likewise, these suppliers are obligated to other retailers as well. Since they are the ones who keep a record of their product inventory, you won’t be aware that the merchandise is out of stock. And then you will not be able to fulfill the demands of your customers, which will deteriorate your reputation in the long run.
Complexities with shipping can occur:
If the supplier has a problem, you are also responsible for all of it. That’s because the brand mark is on your website. The reviews you get for the products will appear on your website. So you have to be very careful while looking for a supplier. They even sell quality products, the packaging and delivery are up to the mark.
The risk in offering and selling products that are no longer available from the supplier results in potential customer service issues.
Complex delivery costs:
If you include products from different categories on your website, you must submit your orders from independent suppliers.
The problem that comes up here is that if you work with a number of suppliers – as most drop shippers do – all suppliers don’t offer the same delivery costs or they may be in several different countries. Managing this can be a bit daunting and this will certainly complicate shipping costs.
For example, if a customer orders two products that you provide from different suppliers, he will be charged for two different shipments, which can be a major hurdle.
How to Overcome Dropshipping Challenges: The Right Approaches to Dropshipping Business
Here, we’ve outlined some tips that you need to address in your dropshipping business plan to build a successful dropshipping business, overcome dropshipping challenges and ensure your business doesn’t get disrupted.
Make Your Website User-Friendly
You must have a professionally designed store where it is not enough that the software is good, but the design must be good.
Anyone who enters a website and finds it poorly designed, inconsistent and unprofessional will leave the site straight away.
Everyone who enters a website and finds it slow and does not perform quickly will leave the site straight away. The client is always in a hurry and will not wait for the site.
Find the Best Dropshipping Products
Choosing the right products to sell is only half the battle. After all, if you choose a bad product, you will not get many sales and the dropshipping business is unlikely to succeed.
Fortunately, there are millions of options to choose from when it comes to choosing a product to sell. It is just a case of knowing which option is best for you.
Choose products carefully, where the competition is few and demand is high. Once you’ve chosen a profitable product, you’ll be ready to start selling.
Find Reliable Dropshipping Suppliers
Your suppliers are at the heart of your dropshipping business. Therefore, it is important to find reliable suppliers with great prices, that you can finally trust to stock your items and have them shipped on time.
Based on the supplier doing their job well and fulfilling orders on schedule and efficiently. Therefore, it goes without saying that choosing the right supplier is one of the most important steps towards creating a successful brand. If the supplier/vendor does something wrong, you and your business are responsible, so the key is to find someone who sticks to the plan and is open to communicating with any issues.
Find a shipper who knows the drawbacks of dropshipping and how to deal with them efficiently, along with a sales representative who can answer any queries to put your mind at ease, will make a good team and definitely reflect positively on your business.
Look for a supplier that offers high-quality products: Higher quality products result in a higher level of customer satisfaction which means lower return items and satisfied customers.
Target the Right Audience in Advertising
How to make ads that target the segment dedicated to marketing the product. For example, you want to market an iPhone, so you must have complete knowledge about making an advertisement and target a specific segment only.
The target audience may be determined by age, gender, income, location, interests, or a myriad of other factors.
When you pay for advertising, this money appears to a large number of people, and then you pay money to people who are not interested in your product, so you lose your money.
You must have advertising experience to deliver a successful ad targeting the right audience.
The last point of the drop shipping essentials, you need patience, patience, patience.
You must have a long breath because this project requires effort and you put your attention, all your thinking, and energy to succeed.
When you have a simple mathematical question and you read it and you are certain that you do not know its solution, your success will be completely different when you solve the question and you are certain that you are able to solve it.
The difference is huge between entering to succeed or entering to try. Enter the project with the desire and intention to get the successful project.
If you have all the success points and are able to overcome them, then you are qualified to enter this project directly. If you do not have the basics and cannot skip them, then you need to train on one or all of them.