Did you know that eCommerce will make up 23% of all global retail sales within the next two years? Online sales are bigger than ever and many people are racing to capitalize on its impact. One way to do this is through dropshipping, but do you know how profitable it really is?
We have all seen social media adverts saying how you can make money quickly and easily. Read on as we sort fact from fiction and ask “Is dropshipping worth it?”.
What is Dropshipping?
Dropshipping is a method of retail, in which you ship products directly to consumers from the suppliers. There are a number of benefits over traditional retail methods, but also a number of drawbacks.
Advantages of Dropshipping
With so many advantages, it is easy to see why dropshipping has become so popular. Some of the more attractive incentives are listed below.
Easy to Start
When you start dropshipping, it may seem like there is a mountain of tasks to perform. However, when broken down into smaller chunks it becomes very easy. All you need to do is choose a niche, find the best dropshipping suppliers, set up a store and market your products.
Compare this to the amount of work you would have to do to start other businesses. You would be required to arrange storage and work out how to ship the items.
In addition, you need very little in the way of startup costs. Some people have even started without any investment whatsoever. However, you should put some funds into getting samples from the best dropshipping suppliers, then marketing your product.
No Inventory Is Required
Another huge benefit of the dropshipping lifestyle is that you are not required to manage an inventory. The work needed in this is extensive, as you have to track products, sales, and reports. Managing the physical stock in a warehouse often requires the hiring of additional staff.
With dropshipping, you don’t even need a physical location, let alone staff members. Your dropshipping business can be started from your bedroom or while sat sipping cocktails on a beach. Click here for more information on how to start a dropshipping business.
Disadvantages
Like every business, dropshipping does have its problems. While it is passive and easy to set up, you still have to work just as hard in other areas to maintain a business.
Competition
With so many advantages, it is inevitable that dropshipping has lots of people already making money from it. Many of them will have been doing it a long time, and they will have cornered every niche imaginable. That makes it hard to compete.
This is made even harder by the fact that building a brand is very difficult. Products delivered to the customer will have the supplier’s logo and packaging. After the initial purchase on your website, they will not have much contact with you at all and little incentive to do so again.
Low Profit
A lot of the hard work when dropshipping products is done by the wholesalers. Your fulfillment partners are doing the warehousing, labor, and arranging postage. Because of that, they will charge.
Extra fees will be added for completing these tasks. This decreases your profit margins to a much narrower portion than it would if you were buying wholesale.
In addition, you are exempt from many of the discounts you would get as a wholesaler. By buying per item, some of the costs may almost reach retail rates.
Limited Control
You also have no control over how and when dropshipping websites send your goods. They may come late or even be damaged. All of this is down to the fulfillment center, making it even harder to build a relationship with customers.
Some suppliers may even outright vanish. They may go out of business or stop providing the product you sell. Your whole business model and product line may need to change.
It is best to try and find a trustworthy supplier. Look at the reviews the company has, and check how long they have been in business.
Is Dropshipping Worth It?
There is a lot of talk about the fact that dropshipping can no longer be profitable. This is usually down to the amount of competition.
However, dropshipping can still make you a healthy sum of money. It may not have the easy profitability it did in the early days and now requires more hard work, but it can be a legitimate way to earn.
Start by aiming for a great niche, going small, and finding something you are passionate about. For instance, instead of starting a sportswear dropshipping company, you may concentrate on a smaller aspect that has less competition. There may be a hundred basketball drop shippers out there, but how many are there for sports like handball and lacrosse?
After this, put your time and effort into marketing your company in a smart way. Digital marketing and PPC advertising will be your biggest ally. You may even invest in a company to do this aspect for you, or purchase high-end software to automate the process.
Finally, take time to analyze your data and metrics. These can tell you everything from site visits to conversion rates. By using A/B testing, you can gradually improve upon your set goals, slowly optimizing until you have the perfect sales funnel.
Getting Started
Now you know the facts, only you can answer the question “Is dropshipping worth it?”. You will not get the easy ride many people did in its early days. However, if you are willing to put in time and effort you could see great returns.
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