WHAT IS DROPSHIPPING: THINGS YOU NEED TO KNOW BEFORE GETTING STARTED

If you’re seeking an online business opportunity, chances are that you’ve come across dropshipping. Dropshipping is an online business model that can generate high returns for the aspiring ecommerce entrepreneur. It’s possible to start dropshipping with a small amount of startup capital and some sweat equity. Once you begin to see success, you can scale by allocating more resources to advertising and brand building. But how does dropshipping work, and why should you go for this model to realize your entrepreneurial dream?

Before we get any further, it’s important that you have an answer to the question ‘what is dropshipping?’

What is Dropshipping?

Dropshipping is a type of retail fulfillment method for online stores, where instead of warehousing inventory, merchants purchase products from third-party suppliers as customers make orders. The products are then shipped directly to the consumer. This way, the seller doesn’t have to handle the product directly. Sound familiar?

For the retail store manager, when it comes to shipping and order fulfillment, this is a mostly hands-off process. The merchant doesn’t have to stock products, order inventory in bulk, or physically fulfill the orders in any way. Instead, the third-party supplier will ship products on the merchant’s behalf. 

Dropshipping is great for entrepreneurs because running a store doesn’t demand as much operational capital as the traditional retail model. You don’t have to open a brick-and-mortar store, hire employees, keep the lights on, pay overhead, or stock products. Instead, you open an online storefront and buy wholesale from suppliers who already have products and warehouse space.

Benefits of Dropshipping

1. A dropshipping business is easy to set up 

You don’t need prior business experience to get started with dropshipping. If you take some time to learn the basics, you can launch a business quickly and learn the rest as you go. 

It's easy to start a dropshipping business because start-up costs are low -- especially when compared to other types of retail business models. For instance, you don’t need a warehouse to store products or a team to help you out. You also don’t have to worry about stocking or shipping either. It’s surprisingly hands-off, especially once you get going.

All of this means that you can start your business today. In fact, you can get everything up and running within a matter of hours.

You will need some foundational knowledge and the right tools and resources, and that’s why we created this guide. By the time you’ve finished it, you’ll be equipped with the knowledge you need to jumpstart your own dropshipping business.

2. Dropshipping is scalable

As you scale up, your business model doesn’t have to change very much at all. You’ll have to put more work into sales and marketing as you grow, but your day-to-day will stay more or less the same aside from processing more orders.

One of the benefits of dropshipping is that the infrastructure costs don’t skyrocket when you scale. Because of this, you’re left with more to allocate to the marketing side of your business. The more you focus on promoting your business and delivering great customer experiences, the better off you’ll be.

3. Dropshipping doesn’t require an office

You can run an entire business right from your laptop, and you don’t need to make any high-level investments. Your largest expense will be advertising, which is a budget you can scale as your store gains more traction. Even as your business grows, your costs will be fairly low – especially when compared to traditional business expenses.

4. Dropshipping is flexible

This is one of its biggest benefits. You get to be your own boss and set your own rules. It’s by far one of the most flexible careers that anyone can pursue.

You can work from home with little more than a laptop, and you can work at the times that are most convenient for you. This is ideal for entrepreneurs who want a business that works for them. You won’t have to bend over backward to get things done. Instead, you set your own pace.

Dropshipping is also flexible in that it gives you a lot of room to make decisions that work for you. You can easily list new products whenever you want, and you can adjust your strategies on the fly. If you’re going on vacation, you can automate everything to generate passive income while you’re away. You get the idea – the possibilities are limitless.

5. Dropshipping is simpler to manage

Since it doesn’t require you to make too many commitments like hiring staff or renting warehouse space, you can manage everything with little hassle. Once you’ve found suppliers and set everything up, for the most part, you’re only responsible for managing your online storefront.

Disadvantages of Dropshipping

1. Dropshipping has slim margins

One of the disadvantages of dropshipping is that you should expect low margins initially. That’s not to say it can’t be profitable, but you should be aware that the product margin in some niches might be small.

This issue is especially problematic when you’re dropshipping in a super-competitive niche. When you’re fighting for customers’ attention, it can be difficult to achieve the kind of profits you desire. However, if you choose the right niche, and target the right audience, you’re far more likely to attain wider margins. In niches with lower competition, you’ll also have better margins, but at some point, sales may begin to plateau. That’s why the success of many dropshipping stores is dependent on highly optimized advertisements driving high volumes of sales. 

2. Dropshipping can complicate order processing 

Dropshipping seems straightforward: The customer orders, you process, and your supplier fulfills. And for the most part, it is simple.

However, if you’re sourcing products from multiple suppliers, you might run into some problems. Each of your suppliers might use a different shipping solution, which presents a problem for both you and your customers. Depending on your shipping setup, the cost of shipping can be prohibitive, especially when shipping multiple products.

Different suppliers will also have different structures in place for processing and billing. Since you have to manage the interaction with your suppliers, this can sometimes get tricky.

3. Dropshipping doesn’t give you a lot of control

One of the disadvantages of dropshipping is that you don’t have control over certain aspects of the dropshipping process such as stocking products, order fulfillment, and shipping. You have to rely on your suppliers to do everything right and work seamlessly. This lack of control can be off-putting to some entrepreneurs, but it usually isn’t a problem.

This just means that when something goes wrong, it can be tricky to manage. While supplier problems can sometimes cause customer retention issues, you can mitigate them and keep customer churn to an absolute minimum with the right damage control.

4. Dropshipping makes customer service more challenging

This is another problem that happens when orders go wrong or suppliers fail. Because you’re just the store owner and don’t have a lot of control, it can be difficult to sort out orders and handle customer support.

One of the most unfortunate disadvantages of dropshipping is that you have to take the blame when your customers complain. You could be doing everything right and still run into problems if your suppliers have issues. That being said, taking responsibility and absorbing the mistake on behalf of your suppliers is all part of the business model, so don’t sweat it!

Is Dropshipping for You?

Dropshipping isn’t for everyone. And it certainly isn’t a get-rich-quick scheme. But if you’re willing to take the good with the bad, then it can be an exciting endeavor. That being said, it’s still understandable if you have reservations like these: 

• “I don’t know if I have enough time to start a business.”

• “I don’t want to risk getting fired from my day job.”

• “What if I spend a lot of time and invest money into dropshipping only to be unsuccessful?”

When thinking about starting a business, it’s normal to have those reservations but don’t let them stop you. If you think dropshipping might be a way for you to earn more money and enjoy newfound freedom, take a leap of faith and dive in! 

At Vogon we provide a custom made course on how to start with eCommerce!
Have a look at it here and learn the exact steps to grow to +10k a month with eCommerce.