Dropshipping is one of the most popular business models at the moment, but what are the pros and cons?
Dropshipping is one of those hot words in business right now. As more and more start-up businesses arose from the ashes of lockdown, dropshipping became a more popular model than ever.
At its core, dropshipping is a fulfilment model where an online store doesn’t actually hold stock of the products they sell. Instead, the product is ordered and lands immediately with the fulfilment centre, who then send the product on to the customer without the seller ever touching it.
It is far less complicated than you may believe and can be an incredibly efficient way of running an eCommerce business. The process allows a service to be provided without the added stress of handling product distribution.
This blog will highlight the positives and negatives of dropshipping so that you can analyse how it may work for your business. So without wasting any more time, let’s get into dropshipping!
The pros of dropshipping!
1. You need less capital
It may sound like stating the obvious, but you need less capital to get started with the dropshipping model. You can throw all your money at a great looking eCommerce store and not have to invest thousands in inventory.
Because any orders will go straight through to the wholesaler, you don’t pay for your products until they have been paid for by the consumer. This all means, if you’ve chosen the right wholesaler, there’s less risk financially associated with this method.
2. Geographical flexibility ️
A business that operates the dropshipping model can be run from anywhere. There’s no need for a physical location, just an internet connection, and you’re ready to go!
3. Getting started is easy
Building a business involves long, tiresome hours! Sweat and a whole lot of tears are often poured into everything worth having.
With dropshipping, you no longer have to worry about intrinsic details like managing inventory, packaging and sending products and extortionate warehousing costs. All you need is a great product and a user-friendly website; win/win!
4. Your overheads are manageable too
Because all of those extra worries have vanished, so too have the expensive overheads. Most dropshipping businesses out there are run from home, which means you don’t have to worry about any extra costs. Just some minor recurring fees and you are ready to conquer the world.
5. The size of your product offering
One of the advantages of a dropshipping business is that you can expand your product options quickly. As you don’t need to stock the products, you don’t need to worry about a lack of space or wasting money on extra stock. With dropshipping, you can sell whatever products are currently trending at no additional cost.
6. It’s easy to test and, in turn, scale your business
If you’re looking at dipping your toe into the world of business, dropshipping could be the perfect business model for you.
With low costs and reduced workload, you can trial new product ranges or businesses without costly overheads. This is also beneficial for companies looking at moving into new sectors as the risk is minimised; testing something new is significantly easier.
Is dropshipping for you?
When building a business, we know how interested entrepreneurs are in growth. If dropshipping is a growth opportunity that you may not have assessed yet – we know what you’re thinking, ‘how would dropshipping help us grow’?
Think about retail businesses in general; if your company received twice as many orders as usual, that would mean twice the amount of work for you and your staff! However, with the dropshipping model, large portions of the work are passed on to the supplier; therefore, you can quickly scale your business whilst managing the extra customer-related work.
eCommerce at Create8 ️
For your eCommerce business to be successful using the dropshipping method, your website must be better than your competition. That’s where we come in!
At Create8, building eye-catching eCommerce websites is just what we do. Our team has a shared mentality of breaking the mould and creating a website that allows each of our clients to thrive. To see some of our previous work, follow the link below, and if you want to chat further, feel free to contact us today!
The cons of dropshipping!
Inevitably, all business opportunities also have weaker points. Dropshipping is not for everyone; otherwise, we would all be doing it.
1. The margins
There are very few businesses that aren’t focused on making more money – unfortunately, the dropshipping model will never be the biggest money-maker. Quite simply, if you are dropshipping a product you have purchased from a wholesaler, what is to stop other people from selling that same product too? Well, nothing – and here’s where it gets complicated.
Many businesses that operate with the dropshipping model will have cheap websites. These poorly made websites can undercut those who have invested in a piece of eCommerce magic.
These businesses are also likely to have little/no customer service; therefore, of course, your business will stand out; however, if they can undercut your price, people will still compare the two. The only way to avoid this from truly hurting your margins is to invest in a niche product and really run with it.
2. Problems with shipping
Most online businesses will source their products from many different suppliers; this means shipping costs can get a little complicated. For example, if a customer purchases two products that your business sources from separate suppliers, you will be charged two sets of shipping for those products. We advise that these charges are NOT passed on to your customer. Don’t overcomplicate things; it will put them off.
3. Product not in stock
One of the most significant issues with dropshipping is that you have no control over your inventory. If you use a supplier who also provides the same products to different retailers, stock numbers can vary daily. This becomes an issue if you have an order your supplier is unable to fulfil. Your business will look unprofessional to the customer, and it can have a knock-on effect on your brand.
Fortunately, several plug-ins and applications allow retailers and suppliers to communicate on stock numbers so that these issues do not occur. The problem can be, if the retailer doesn’t have a professionally built eCommerce website, it’s unlikely these extras will be an option.
4. Limited customisation and branding ️
One of the significant problems with dropshipping is that you often don’t have much control over the product itself. Therefore if you are looking for something customised or bespoke, this probably isn’t the model for you.
Most suppliers offer their products as they are with limited flexibility. If they provide branded options, they can often request a minimum order amount, which in turn means you’re kind of not dropshipping anymore.
Is it for you?
When it comes to dropshipping, people’s opinions will always vary – from an agency perspective, we can understand both sides of the debate. For businesses attempting to feel out a marketplace or with limited initial capital, understanding the benefits of dropshipping is essential. The model offers companies a chance if they feel like a more traditional approach is unachievable. For us, there are two different ways to look at dropshipping.
Firstly, you can adopt the literal sense of the term and become a retailer based on an undeveloped platform with little to no customer service. Yes, you will be able to compete with everyone else in the market in terms of price, and you will even have room to offer a slight discount if needed to drive conversions.
Or, you can build something entirely bespoke and stand out so that you can dominate your sector in platform and service to the potential customer.
In the current climate, it’s important to remember that although cost is a very effective motivator when driving sales, people want to buy from brands and businesses they believe in. Offering your customers a memorable user journey can prove far more critical in the long run than cutting small margins off the price point.
At Create8, eCommerce websites are one of our specialities. We understand the value of having the perfect online platform from which to sell you goods. Think of it this way: if you had a shop front, you wouldn’t leave it to wreck and ruin, would you? Your website is the modern version of your store, so please, don’t do likewise.
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