Last Updated: March 10, 2023
Dropshipping is one of those home-based business models that sound too good to be true. But it’s often associated with scams and get-rich-quick schemes. It is, however, a legitimate way to make money online. In fact, it’s often the primary source of income for many digital entrepreneurs. But what is dropshipping, and is dropshipping worth it? This article gives you a clear understanding of what it is and if it’s worth your time and effort.
Is Dropshipping Worth It?
The benefits of dropshipping depend on many factors, including your goals, budget, skillset, and level of commitment to financial risk. When deciding if dropshipping is right for you, consider the following questions.
- Are you looking for an easy way to start an online business?
- Do you have the time and resources to source suppliers, design your store, and drive online traffic to your site?
- Are you okay with low margins of dropshipping income?
- Do you want complete control over your business?
Dropshipping might be a good fit if you answered “yes” to the first two questions and “no” to the last two. But if you’re looking for high earnings and complete control over your business, dropshipping might not be your best option.
The following section includes what dropshipping is, how it works, and its advantages and drawbacks.
|DID YOU KNOW? In 2020, the dropshipping market in the US was estimated at around $13.92 billion.|
What Is a Dropshipping Business?
The middleman is instrumental in the dropshipping meaning—a business model in which eCommerce entrepreneurs sell products without carrying any inventory. When a store owner receives an order from a customer, the owner contacts the manufacturer, who will then ship the products directly to the customer’s doorstep. Dropshipping businesses are often lauded for their low overhead costs and ease of entry.
Dropshipping is a fulfillment method for online stores that enables store owners to buy products from a supplier and have said supplier ship those products directly to the customer. So when is dropshipping a good idea? When you’re just starting a business and have limited time and funds.
How Does Dropshipping Work?
Dropshipping entails the dropshipper hiring a supplier to send items to a client after the customer has placed an order with the dropshipper. Dropshipping explained typically includes the following steps:
- Build up your eCommerce store and market it;
- Choose a dropshipping supplier and make the necessary arrangements;
- Customers place orders, and you process the payments (ideally with a POS system);
- The order is automatically redirected to the supplier;
- Your supplier prepares the order and loads the inventory (usually via inventory management software);
- The supplier ships the product directly to the customer.
|DID YOU KNOW? According to dropshipping experts worldwide, 10% to 20% of dropshipping companies survive.|
Pros and Cons of Dropshipping
Consider some of the following pros and cons of the business model of dropshipping.
The pros include:
Low Startup Costs
Since you don’t need to carry inventory, your only significant expenses would be your website and marketing.
Once you’ve set up your store and sourced your suppliers, there’s not much else you need to do.
Since you don’t need to worry about shipping costs or inventory, you can run your dropshipping business from anywhere globally, with an average dropshipping profit margin between 15% and 20%.
Dropshipping businesses have low overhead costs since there’s no need to carry inventory.
It’s easy to scale a dropshipping business since you only need to be concerned about sourcing more suppliers as your business grows.
You can sell on such multiple channels as eBay, Amazon, and your own website simultaneously, without apprehension about overstocking or underselling.
Wide Range of Goods
The dropshipping meaning also excludes the necessity of a physical warehouse. So you’re not limited by what you can physically fit in a warehouse; you can offer an endless variety of products in your store.
The cons are:
Because of the low barrier to entry, there’s a lot of competition in the dropshipping space, which drives down prices and profit margins.
Dependent on Suppliers
Since you’re relying on your suppliers to handle shipping and inventory, it’s essential to vet them and build relationships with reliable ones carefully. If something goes wrong with your supplier, it can have a ripple effect on your business.
Even though it’s a hands-off business model, dropshipping still requires a lot of work to be successful and have a decent dropshipping salary. You’ll need to put in the time to source suppliers, design your store, and drive online traffic to your site.
Since you don’t need control over the manufacturing process, there’s always the risk that your supplier might send you products of lower quality than expected.
It can be challenging to build a strong brand when selling products already being sold by other retailers.
Dropshipping is a prevalent business model. So you’ll be competing with many other businesses.
Range of Offers
How much money can you make dropshipping if you have suppliers dropshipping only limited products? This can be a problem if you’re trying to sell niche products.
|Dropshipping is hiring a wholesaler to send items to a client rather than producing and delivering the goods yourself.|
|Dropshipping pros include low startup costs, multi-channel selling, and location independence.|
|Poor product quality risk, high competition, and hard work are drawbacks of being a dropshipper.|
|A successful dropshipping business is more than just a website with products for sale; it’s a brand that clients can trust and return to.|
With an average dropshipping profit of 15% to 20% per order, dropshipping is an excellent option for those looking to start a low-cost online business with little upfront investment. There are, however, downsides to this business model that you should be aware of before getting into this online business. If you’re looking for high profits and complete control over your business, dropshipping might not be the best option. Ultimately, the decision comes down to what you’re looking for in a business model.
Dropshipping is a legitimate business model. But because it’s a relatively easy way to start an online business, there are many scams and bad actors around. Be sure to do your research before getting started with dropshipping. If everything is done by the book, a dropshipping salary is not bad.
A dropshipping store is an online retailer that uses the dropshipping business model. Such stores source products from suppliers and ship them directly to customers without carrying inventory.
A dropshipper is a seller who manages inventory for a retail shop. This online merchant is primarily responsible for generating online traffic to the store and fulfilling purchases—so the dropshipper is a go-between, collecting dropshipping income.
Is dropshipping worth it? It’s not easy to make money with dropshipping, but it can be profitable. To be successful with dropshipping, you must put in the time to source suppliers, design your store, and drive traffic to your site. Because of the low entry barrier, there’s a lot of competition in the dropshipping space, which drives down prices and generates low-profit margins.