Is dropshipping worth it?
If that's the question you've been asking yourself lately, then let me take a guess why:
- You recently heard about dropshipping, a method of selling products online without investing in inventory.
- You've seen influencers and businesspeople talk about making millions of dollars through dropshipping.
- And, lastly, you've heard some criticisms about dropshipping as well. Either that it's not profitable, or it's unethical, or that it's too late to get involved with it. The gold rush is over.
All of this has you feeling confused and unsure of what to believe. Do you trust the seemingly successful influencer, who also wants to sell you their $500+ course? Or do you believe the naysayers, and turn your back on what could be a great opportunity to escape the 9-5 rat race?
Everyone has an opinion, and most people have some sort of bias. But, more than that, everyone wants to live in their own little version of reality. If they can convince you that dropshipping is dead, then it validates their decision not to get involved in it themselves.
The e-commerce influencers, on the other hand, seem to sometimes enjoy the attention more than the instruction. They regularly flaunt new cars, Shopify screenshots, or exotic locations that get you sitting up in your chair. Their final message? To buy their course, or click on the affiliate links in their video description.
People portray dropshipping as a 'get rich quick' scheme, and oversimplify how easy it is to be successful at it. In reality, dropshipping is hard work. It can still make you a bunch of money, but unless you know what you're doing, it's not going to happen overnight. You'll need to put in the work and be willing to learn.
Is Dropshipping Worth It? The Recipe For Success
Like many entrepreneurial pursuits, you'll need to be able to focus in order to succeed in dropshipping. There's a lot to do when starting a business, and your focus is what will keep you on the right track. Distractions are the enemy.
Willingness To Learn
Being curious and willing to learn new things is crucial for building a business because you'll be competing with others. You're not going to know everything at the beginning, and that's okay. No one does. Just keep learning, and put one foot in front of the other.
If you fail at launching a store 99 times and succeed on the 100th try, then you didn't truly fail. The path to success just took 99 more tries than expected. And that's okay. The business world might beat you up on some days, but you need to keep pushing forward. Keep working at it. Keep trying. Every failure will make the feeling of success even greater when you do succeed.
Is Dropshipping Worth It? Why Dropship?
Sure, money can't buy you happiness. That's true. But, it can buy you freedom, and that's the next best thing. Freedom can look like whatever you want it to. It can mean not waking up with an alarm clock, or it can mean deciding to extend your vacation by another few weeks without worrying. Freedom is what allows you to breathe easily, knowing that you and your family will be taken care of regardless of whether you decide to work today. Nothing beats it.
The reason fulfillment comes after freedom is that it's difficult to feel fulfilled when you feel like you never lived up to your potential. It's not our starting circumstances that define us, it's what we choose to do with them. Live your life like you're the main character in a superhero movie. Sure, you got beat up in the beginning, but the movie can end with you on top.
Successful people take the leap.
It's A Start
Look, dropshipping isn't the ideal business. It's not what you dreamed you would be doing as a child. But don't forget, it's a start. Dropshipping can get the ball rolling on a larger career. You can learn new skills, test out products, and build an audience, all while making some money. It doesn't have to be part of your end game. It's fine for dropshipping to be a stepping stone while you get closer and closer to what you want your life to be.
Dropshipping Done Right — Top 3 Strategies
#1 - Curate A Store Along A Niche
Curation is one of the best ways to run a dropshipping store in 2021. The e-commerce industry's growth has been significantly accelerated due to the ongoing pandemic, and there are more products being sold online than ever before. This massive influx of products is creating a lot of noise and can overwhelm consumers. This is where curation comes into play.
Curation is where you assemble products in your store in a way that adds value to your customers. Instead of them going to Amazon or Google and sifting through thousands of products, they can come to your website for a hand-selected collection of the best products in a certain category. Even though you aren't the true source of these products, the fact that you are grouping them together and standing behind them will be enough to generate some sales.
In order for this strategy to be successful, you need to focus on a certain niche or category. It shouldn't be "Tom's Favorite Products". You should be creating a brand, or a platform, where you feature products that align with your brand's values. And by clearly articulating what your store stands for, your customers will belong to you, rather than the products you choose to feature.
In this strategy, you're the orchestra's conductor. While a musician will play a single instrument, you play the entire orchestra. You can bring some order to this otherwise chaotic world.
#2 - Supplement Your Own Products with Dropshipping
The second strategy to dropship effectively is to use it as a means of expanding your own collection of products.
For example, let's say you own a pet store with a small line of dog collars and leashes, and you're making a few thousand per month in sales. Well, you could invest some money into expanding your product lines, or you could supplement your catalog with dropshipping products.
This would allow you to start selling chew toys, feeding bowls, dog outfits, and more, practically overnight. There's no initial investment, no back-and-forth with manufacturers, everything can be set up on your store in a matter of hours.
And, once you begin to see what products are selling, you can think about making your own version under your brand.
#3 - Branded Dropshipping
The third option is to focus on branded dropshipping. Branded dropshipping involves setting up an arrangement with your supplier to put your brand on their product, instead of theirs. The benefit of this is that it allows you to build up your own brand equity, while still creating sales for them.
This works best for products that aren't heavily branded, to begin with, such as coffee. Coffee beans can be repackaged into a new bag with your company's logo on it, without much hassle.
These arrangements can be a bit complicated to set up, but it can definitely be done. We're also working on setting up a white-labelling system for DropCommerce to allow our merchants to brand their products, but it hasn't been released yet.
Make sure you sign up for our newsletter if you want to receive updates about when it will be released.
Is Dropshipping Worth It? Frequently Asked Questions
Is Dropshipping Worth It? Is It Even Legal?
Yes, dropshipping is perfectly legal.
Dropshippers are basically distributors for other companies. Product suppliers can sell their products on their own website, marketplaces like Amazon, and dropshipping networks like DropCommerce. Dropshipping enables independent retailers (like your neighbours down the street) to make a living by selling products online.
Just make sure that you don't explicitly claim that the products you're selling were created by you, or claim that the product does something that it doesn't. This is an easy way to alienate your supplier and be put on their blacklist.
Is Dropshipping Worth It? — The Main Benefits of Dropshipping
Dropshipping can be a great business model if it aligns with what your business is trying to achieve. The main reasons to consider dropshipping are:
- It minimizes start-up costs. You can start a business with only a few hundred dollars if you're willing to put in some sweat equity.
- You can test products. Thinking about launching a new product? Try selling something similar first to see if it's worth the investment.
- Reduced storage and logistics costs. With dropshipping, you don't need a warehouse or staff for the processing of orders. You just pay for the shipping and click a few buttons.
- Low cost of inventory. Inventory is a major expense to traditional retailers. But, with dropshipping, you'll never need to worry about your capital being tied up in inventory. It's not your burden if the inventory becomes obsolete, depreciates, or expires.
Is Dropshipping Worth It? — The Main Cons of Dropshipping
- Less control. This is the main downside of dropshipping. You cannot control your processing speed, how much inventory you have available, the packaging, or even purchase price. You just get to control who you work with.
- Reliance on another business's stock. While it's nice to be able to change you product offerings with a moment's notice, the downside is that your suppliers can do the same. Your bestselling dropshipping product can discontinued, altered, or have the prices increased without notice.
- Lower profit margins. Since you are taking on less risk and responsibility, you inevitably give up some of the profit margin that would come with it.
- Worse customer service. Offering customer service as a dropshipping business can be difficult because you're reliant on third-party suppliers. If the order is delayed or damaged then your customers will take it out on you, and you might not have any answers for them.
Where Do I Find Dropshipping Suppliers?
There are a few different ways to find dropshipping suppliers.
The first is to reach out to a brand directly. If you want to sell Brand X's products, they might work with you. You can work out a discount, list them on your store, and send your orders to them at the end of the day for processing. However, there are some limitations to this model. You won't be able to synchronize your inventory with the supplier, so you might end up selling products that are out of stock. It's also difficult to process payments, in addition to being a time-consuming process.
The second option is to use a service like DropCommerce, which solves a lot of the problems mentioned in the first option. DropCommerce connects you to high-quality North American suppliers and makes it easy for you to set up the products on your website. DropCommerce syncs your inventory, streamlines the orders, and processes payments. There are other applications like DropCommerce that can connect you to suppliers from other parts of the world, but if you're looking for North American suppliers, then DropCommerce is your best bet.
Can I Combine Dropshipping With My Existing Business?
Yes, you can definitely sell dropshipping products in addition to what you're currently selling online. If you have a Shopify or BigCommerce store, you can sell your own products and supplement your product offerings with dropshipping products from DropCommerce.
Do I Need To Register a Business Entity to Dropship?
Yes, you'll need to register your business once you begin to make sales. But, you don't need to do it from the beginning. Test out your store idea first, then use some of your profits to cover the costs of setting up a corporation.
Note: This is not formal legal or financial advice. You should speak with a lawyer or accountant that is familiar with the laws pertaining to your specific region.
Is Dropshipping Worth It? — Start Up Investments
Dropshipping businesses can be started with as little as $500, provided that you can make up for the lack of budget with your resourcefulness. However, we would recommend starting with a budget of at least $1000 so that you can pay for orders comfortably. It might take a week or two between when you pay for an order and when the revenue gets deposited into your bank account, so keep that in mind.
Is Dropshipping Worth it? — Profitability
While dropshipping has been criticized for being less profitable compared to a private brand, dropshipping is still a profitable business model. This is due to how little you need to invest to get started. You aren't pre-purchasing inventory. You aren't paying rent on a retail location or warehouse. You're only paying for products that have already been sold, so there's a lot of potential for profit as long as the unit economics make sense.
We interviewed one of the top-performing merchants using DropCommerce, and she informed us that her profit margin was about 35% for her first year of operations. Considering that her revenue was over $2.3 million, this means she generated roughly $800,000 in profit. We would certainly consider this to be profitable.
Is Dropshipping Worth it? — The Best e-Commerce Platforms
There are a lot of different e-commerce platforms available for you to use. They can be divided into two basic categories.
- Consumer-facing marketplaces such as Amazon, eBay, and Etsy. These platforms connect buyers and sellers and facilitate their transactions. All of these platforms are good for beginners, but DropCommerce is not compatible with any of them.
- E-commerce content management systems such as WordPress, Shopify, and BigCommerce. These platforms make it easy to build an independent website from scratch and give you everything you need to process payments and orders. WordPress (and its e-commerce plugin WooCommerce) is free to use, while Shopify and BigCommerce operate on a subscription + transaction fee basis.
All things considered, we believe that Shopify is the best platform for dropshipping since it offers the most freedom, customization, and third-party applications.
Is Dropshipping Allowed on Amazon?
Yes, dropshipping is allowed on Amazon. But they don't call it dropshipping, they refer to it as "fulfillment by merchant". You can create a listing on Amazon for products you have in your possession, and once a customer orders them, it's up to you to ship the order to the customer.
There are some rules, however. Make sure you're familiar with them before you get started.
Unfortunately, DropCommerce products cannot be sold on Amazon, since we reserve that right for the product's supplier.
Is Dropshipping Allowed on eBay?
Yes, dropshipping is allowed on eBay. However, they make some distinctions.
Dropshipping is allowed when you list an item for sale and then fulfill the orders directly from the wholesaler/manufacturer. Dropshipping from a third-party retailer is not allowed.
To illustrate this rule with an example, you can sell Brand X's t-shirt on eBay as long as you send the orders to Brand X or their wholesaler for fulfillment. This begins violating the rules when you need to purchase the shirt from a retailer (like Walmart) for fulfillment.
Is Dropshipping Allowed on Etsy?
Dropshipping on Etsy is a bit more complicated.
Etsy is an online marketplace that focuses on vintage, handmade, and craft products. This means you won't be allowed to dropship regular products, like books or electronics.
One form of dropshipping that is allowed is print-on-demand. Etsy considers these products to be acceptable because 1) you still had to make the design, and 2) a person was involved in the printing, therefore it was handmade with a machine's assistance. Just make sure that your store's About Us section includes your print-on-demand suppliers and contractors.
Hopefully, we haven't scared you off from dropshipping completely. As much as it can be difficult to get started with, dropshipping still presents a great opportunity for those who are equipped to take advantage of it.
"The scariest moment is always just before you start. After that things can only get better." - Stephen King
The hardest part is in getting the ball rolling. When you're just starting out, you won't have an audience, a fully developed marketing plan, or anything that makes your business stand out. It will take time to assemble all of these components.
But, once you've gotten things off the ground, dropshipping can completely change your life. It really is possible to make millions of dollars by only selling other people's products, it's just going to take some time.
If you've got the enthusiasm, the drive, and the willingness to learn, then give it a shot. As long as you aren't quitting your 9-5 or betting your house on it, then what's the worst that can happen? You need to believe in yourself before you can be successful.
"The best time to plant a tree was twenty years ago. The second best time is now." - Chinese Proverb
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