Have you been asking yourself – what is the advantage of using drop shippers? Are you curious about the possible disadvantages of dropshipping? If so, this is a must-read for you! In this article, we will touch on all the crucial benefits and risks of drop shipping in 2023 so you can make the best decision for your business. After all, it’s only reasonable to know all of the cons and pros of a particular solution before laying your money and reputation on the line. Without further ado, here’s all you need to know about dropshipping and how it can benefit your online business.
- Dropshipping is a low-risk model of operation for e-commerce businesses.
- The initial investment into the dropshipping business can be minimal, which makes it a really attainable solution for entrepreneurs with smaller capital.
- There is big competition in a dropship-based business market, which means this model usually comes with low profit margins.
If you’re making your very first steps in the journey to becoming an e-commerce seller or online retailer, you may not know what dropshipping actually is. What we’re talking about in this article is of interest to those who already have a more or less grounded idea of how dropshipping works, therefore, we’ll keep this introduction short and sweet.
If you want to learn more about this topic, we invite you to read our article on What Is Dropshipping and How Does It Work in 2023? There, you’ll find a more in-depth look at the whole dropshipping process.
For all intents and purposes, dropshipping is a logistical model in which a seller accepts customers’ orders without keeping the stock of products on hand.
Sellers source the products from suppliers and ship them to their customers, acting as a middle-person, of sorts.
As you can imagine, this model has many advantages but also comes with some set of potential drawbacks and complications. Let’s talk about them.
Benefits of Dropshipping
Lower Investment and Risk
What initially draws people into this shipping fulfillment model? The most important factors for beginner e-retailers – low investment and reduced risk.
Typically, when you start a business, you need to make some substantial investments upfront. In the case of online retailers, this may involve the purchase of inventory and then costs associated with its storage and distribution.
But dropshipping essentially eliminates this step, as you’re not buying the products beforehand, but only after a client makes their purchase. You’re not buying products that haven’t sold yet, and you don’t need to worry about their storage. Which also reduces the risk you’re facing when opening up a business.
In most cases, you can open your e-commerce business without taking a large loan and risking defaulting.
Easier to Jump In
Piggy-backing from that last point, it’s because of that lower risk and smaller initial investment that it’s much easier for people to start their businesses. Not only is it more attainable since you don’t need to acquire a lot of funding for your retail store, but dropshipping can also be easier to handle logistically.
You get to opt out of finding and paying for a warehouse, packing and shipping your products, handling returns, as well as monitoring and maintaining stock levels. You don’t need to spend your time and money on that whole process, which can be a really substantial benefit for those with less experience or time on their hands.
That’s why dropshipping is a great solution for beginners in the e-commerce space.
Less of a Time Investment
And talking about time, it’s also worth noting that drop shipping can be immensely useful if you don’t plan on spending the equivalent of a full-time job on running your internet store. As we mentioned above, this model frees you from many shipping-related processes that normally take up a whole lot of time and effort.
If your goal is to start a side hustle with your internet retail store, this solution might be worth looking into.
Diversification of Your Offer
One of the more substantial risks that come with running an e-commerce business is operating in the right niche at the right time. Most beginners cannot allow themselves to cover a large base of products and niches right from the bat. However, if they don’t find customers for what they have in their offer, they’re risking going under.
This risk can be greatly minimized with dropshipping, which allows you to easily diversify your product selection and follow the trends as they come and go. Changing your offer can be as easy as uploading new product listings onto your website.
Flexibility in How You Operate
Dropshipping offers you a lot of flexibility in how you run your e-store, which, again, is something that novices will appreciate. You don’t need to rent any designated space to operate your business. You can do it comfortably from your couch or kitchen.
It might be a suitable way to work for those entrepreneurs who value a life full of adventures. Because you can easily take your work with you to whatever world destination you want to visit or live in. As long as you have an internet connection, you are free to work from anywhere in the globe.
All of these other advantages combined result in potentially faster and easier scalability. In the dropshipping model, you’re essentially sharing a workload with your suppliers. Much of the heavy lifting is taken from your plate. Even if you get a sudden influx of orders, this doesn’t necessarily influence the amount of work you need to put in.
Meaning you can process many more orders than if dropshipping was not involved, growing your business at a quicker rate.
Disadvantages of Dropshipping
It’s easy to see why this shipment model is such an attractive solution for many e-commerce businesses. The advantages of dropshipping are hard to miss.
But what about potential drawbacks to this model?
Reliance on Suppliers
While you never have to worry about your products being out of stock, you are still very much dependent on the availability of the products offered by your suppliers. Additionally, the more suppliers you work with, the more complicated it gets to track the inventory. It might be necessary to rely on tracking systems, which may or may not introduce additional costs.
Reliance on third-party suppliers can also be disadvantageous in moments when suppliers fail to fulfill their end of the agreement and deliver the products. If something goes wrong, you are the party responsible for it, not the supplier that didn’t manage to send all of their packages on time or simply decided to shut down the business.
Another factor worth considering is the fact that the dropshipping model usually comes hand in hand with low profit margins. The competition on the market is fierce, and stores that are able to stay afloat are usually the same ones that keep their prices as low as possible.
We already mentioned some of the logistical hurdles you may face when using multiple suppliers, but tracking the inventory is only one piece of the puzzle. Another one is managing all the shipping costs among different suppliers, as well as facing costs when a client makes multiple purchases at the same time from one of your suppliers.
In this scenario, you will be charged shipping costs multiple times. The packages can also be delivered at different times, which may reflect poorly on you.
Dropshipping requires great attention to detail and cultivating good relationships with your suppliers (in order to keep the whole process running smoothly), and striking a good deal that will save money on additional shipping costs. If you lack problem-solving and social skills, you may find it harder to use dropshipping to your full advantage.
One common issue with dropshipping store owners is having almost no tools or opportunities to perform quality control on-site. However, they also bear all the risks and need to navigate relationships with clients, addressing their concerns and complaints. Which means that they are also blamed when something does not go as planned, a package is held in the supplier’s warehouse, or products arrive to the recipient damaged.
Dropshipping on a Different Level
There are certainly some cons to dropshipping, and it’s good to be aware of them before you base your business model on this solution. The good news is that with the support of Dropship China Pro, you can overcome or minimize a lot of the dropshipping drawbacks.
We’re your partner in fulfilling all your customers’ orders, adhering to the highest standards of quality and time efficiency. Our services are concentrated around providing you with professional dropshipping solutions, no matter how niche your e-commerce business is. You can count on us to deliver your shipments worldwide, but that’s not all.
Dropship China Pro offers assistance in:
- product sourcing,
- quality control,
- global warehousing
- as well as branding and customization, amongst other services.
We ship the products to your customers, mark orders as fulfilled in your store, and send tracking information to the clients, so you have even more freedom and less stress in how you run your business.
If you’d like to delve deeper, read our Ultimate Guide to Dropshipping to fully understand how it can enhance your e-retail store. Collaborate with Dropship China Pro to capitalize on the advantages of dropshipping and stand out from the competition.
The biggest advantage of dropshipping is low risk and low investment requirements, which opens the door for more entrepreneurs to enter the stage and start an e-commerce business.
The risk assessment can be different depending on what niches you cover, what tracking and work-optimizing tools are in your arsenal, and how much time you can invest in building your store and reaching new customers. Generally speaking, dropshipping is a low-risk model.
It certainly can be! Like any business, it takes some time and effort to create a successful dropshipping-based e-commerce business, but it can be done. We recommend gaining some valuable insights on how to dropship from our guide. You can also find information online on other people’s experiences and recommendations regarding this topic.
Yes, it’s completely legal to dropship. Many businesses use this model of operation with great success.
I am Komo, a marketing specialist with a strong focus on dropshipping. Over the past two years, I have gained valuable experience and expertise in the dropshipping industry. I have successfully implemented various marketing strategies to drive traffic and optimize conversions for dropshipping businesses. My passion for the industry has allowed me to stay updated with the latest trends and best practices, ensuring effective results for the companies I work with.