These four dropshipping tips can help in deciding if dropshipping is the right business for you. As with any business, it is important to analyze all of the facts and risks before making a decision. This article offers considerations that we hope are helpful and should not be interpreted as advice or a recommendation.
The chances are pretty high that you have either seen an advertisement or have heard about people who are making regular income via dropshipping. The very obvious next questions are:
What is dropshipping?
Is dropshipping right for me?
If you are looking for a business that doesn’t require using physical space, is entirely internet-based, and has the ability to be just as profitable, if not more, than a traditional store then dropshipping could be an option for you.
Below are some pros and cons as well as four dropshipping tips to consider.
What is dropshipping?
In basic terms, it is a retail fulfillment option where (you) the store doesn’t hold any of the products in stock. Instead, when someone purchases something from your dropship website, the dropship site purchases the item from a third party supplier, and it gets shipped directly to the customer.
The shop owner does not generally see or handle the products.
You don’t own or stock any items, meaning you don’t have to invest money in space or products – great news for people looking at a less expensive way to run a business from home.
Dropshipping Pros
It can be easier to start than a traditional store because setting up a website is typically less complex than setting up a physical store front.
Dropshipping can be very flexible, it is not location dependent meaning that it can be done from anywhere
The overhead costs are typically lower because you aren’t paying for storage or products. The most likely fees you will pay are the ones for the dropshipping website and all its features
It has the potential to scale. The business doesn’t own the products so can expand and experiment with offerings freely.
You can sell a wide variety of products in almost any niche you choose.
Dropshipping Cons
While setting up a website is relatively easy, a dropshipping business does require the owner to find suppliers which could take more time due to the research, contact and testing involved.
The early days can see very small margins. The business has a somewhat low barrier to entry which tends to increase competition which tends to lead to smaller margins. However, there are ways to increase margins such as choosing a less competitive niche and building a loyal customer base.
Shipping costs can be complex and can erode profit. Dropshipping can require working with a lot of different suppliers. Shipping expenses must be properly calculated and it is important to understand how they impact profit margins. Shipping costs from suppliers are passed on to the business owner who must either raise prices or eat the costs themselves.
When sourcing products, it can be difficult to know when they have gone out of stock because you are not in charge of the inventory. The good news is that there is technology to help with this, but the suppliers must support the function.
Is Dropshipping Right For Me?
4 Dropshipping Tips to Consider
1. Products and Website
It is important to spend some time considering what your business should sell. It can help to research which products traditionally do well on dropshipping sites and make a list of what could potentially work. This step can be difficult, especially for someone who doesn’t have experience in the industry.
Similarly, when building the website it is important to become familiar with the backend and to continually test the user experience from the customer’s point of view.
Both of these elements might require a bit of a learning curve but the results can be worth the effort if they are done well.
