You’ve probably heard of dropshipping and you have thought about “is dropshipping worth it?” or “is dropshipping dead?” especially if you’re looking for an online business opportunity. Dropshipping is a type of online business that can bring in a lot of money for an ambitious e-commerce entrepreneur. With a minimal amount of starting investment and some extra income, you can start dropshipping.
You can scale your business once you’ve achieved some success by allocating greater resources to advertising and brand building. But how does drop shipping work, and why should you use it to achieve your entrepreneurial goals?
But first let us check out what dropshipping actually is?
What is dropshipping?
Before discussing that is dropshipping worth it, lets take a look at what exactly is dropshipping. Dropshipping is a retail fulfillment process in which a firm does not hold stock of the product it sells. When a dropshipping store offers a product, it buys it from a third party (a manufacturer, wholesaler, or another retailer) who then sends it to the client directly.
As a result, if your company uses drop shipping, you’ll be acting as a storefront where customers can come in and place orders. You charge the customer and the drop shipper charges you once they place an order. You are never in contact with the actual products.
Is dropshipping worth it?
We can confidently say that in regards of investment and venturing into a new business, dropshipping is worth it and dropshipping is not dead.
Dropshipping can be successful, but it is dependent on a variety of conditions. When handling fees and percentages taken out by numerous middlemen are factored in, a dropshipping business may not be worthwhile. In the dropshipping area, there’s also a lot of competition. Dropshipping enterprises generally deliver products at very inexpensive prices since they require such a small initial commitment. In order to compete, you must frequently reduce your prices.
It’s been estimated that 20% of new businesses fail in their very first year, and considering how crowded the industry has grown, it’s easy to picture that number being significantly higher for dropshipping stores.
However, this does not rule out the possibility of e-commerce success. Whether your dropshipping business succeeds or fails depends on smart product research and sourcing, as well as selecting a sales platform (one such platform is WooCommerce, you can easily deploy a WooCommerse shop using this guide) that will help you reach your target audience.
Focus on offering outstanding customer service where appropriate, and encourage customers to leave you a review if they’re delighted with their purchase, just like any other internet company. As consumers become more cautious of odd brands on Instagram, having a good reputation will help you grow your business.
Since 2019 (after covid), the search interest in “dropshipping” has been steadily increasing. Of course, there are some peaks and dips, but the overall trend is unmistakably upward — it’s about four times higher in 2022 than it was in 2018.
Let us now look at how dropshipping has increased as compared to Amazon dropshipping.
As you can see, dropshipping has increased exponentially and is on a continuous high as compared to Amazon dropshipping. You can see that dropshipping lagged behind Amazon dropshipping for many years, but has shown explosive growth since Covid-19 hit. It now easily surpasses Amazon dropshipping, at times even having double the search interest.
Is dropshipping profitable?
Dropshipping is still a lucrative business concept in 2022 and beyond. By 2025, the global dropshipping business is anticipated to be worth $558 billion, with an annual growth rate of roughly 7%. When you dropship instead of keeping your own inventory, you may expect to make roughly 50% more money.
The criteria for being a successful dropshipper haven’t altered much in recent years. Selling great products, having quick shipping and handling, and providing excellent customer service are still vital. You also need a brand and a customer service experience that sets you apart from the competitors these days. When customers may switch to another site in a matter of seconds, you must give them a reason to stay with you.
Profitable dropshipping businesses can make anywhere from $50 to $5,000 per day. Stocking high-demand products, having a sufficient profit margin, top-tier marketing and sales, and recurring orders are all essential.
Dropshipping takes time to produce a large profit, which is why you shouldn’t start this type of business if you want to make a profit fast. It’s preferable to start with a great website, a product list, and low-cost, high-impact marketing like email and content marketing to drive traffic.
Is Dropshipping for you?
If your thinking about a quick way to earn money, then dropshipping is not the way for you. That being said, if you have the vision to look for strategies that would be beneficial for your business and you have the patience to wait until your business starts to churn out profits, then dropshipping can be the way for you to generate amazing results.
It’s natural to have reservations when exploring building a business, but don’t let them discourage you. Take a leap of faith and dive in if you think dropshipping could help you generate more money and gain more independence financially.
The Drop shipping Process
Now that we’ve covered what dropshipping is, let’s discuss exactly how it works.
These are the parties involved in drop shipping:
- Manufacturers create the products. They usually don’t sell to the public; they sell in bulk to wholesalers and retailers instead.
- Wholesalers buy products from manufacturers, and then mark them up before selling them to retailers. Wholesalers usually stock products from a variety of manufacturers.
- Retailers sell products directly to the public, at a markup.
Here’s a step-by-step overview of the entire dropshipping process as well as a look at what the customer experiences (and why it matters).
As you can see, the store is simply one component of the puzzle. Multiple parties must collaborate in order for a drop shipping business to be effective. It can be divided into three simple steps:
The products are created by the manufacturer, who then sells them in bulk to suppliers and distributors.
Let’s say Manufacturer A is a water bottle manufacturer. After rolling off the production line, the bottles are sold in bulk to suppliers and wholesalers, who then resell them to retailers.
Retailers purchase the products from suppliers and wholesalers.
Retailers purchase the products from suppliers and wholesalers.
You, as a retailer, are looking for a supplier for a specific product. The store and the supplier then sign a contract to collaborate.
While you can buy directly from product manufacturers, buying from suppliers is typically considerably easier. You’d also have to store, stock, and transport the products, and most manufacturers have minimum purchase requirements that might be rather large.
So, while buying directly from the manufacturer may appear to be easier, buying from suppliers will provide you with the most benefits (and dealing with the slight markup).
Suppliers are particularly advantageous because many of them specialize in a specific niche, allowing you to quickly locate the things you require.
Consumers buy things from retailers.
Suppliers and wholesalers do not sell to the general public; it is the responsibility of the retailer. Between the product and the consumer, the retailer is the last stop.
Consumers can purchase things through retailers’ online stores. Following the wholesaler’s markup, the retailer adds further markup to arrive at the final price. Setting a price that covers the item’s cost price while still bringing you a profit is referred to as “markup.”
That concludes our discussion. From beginning to end, that’s how the dropshipping process works. It’s a simple but important notion in business.
Dropshipping vs. affiliate marketing
Affiliate marketing is a great business to have since you can be very successful without spending much money. Business models like this have many advantages. Nonetheless, the disadvantages stem mainly from the money you could lose if you depended on other businesses. It is therefore a good idea to have a dropshipping element, even if you continue with affiliate marketing. You can ensure a steady flow of income for your business.
Running an online store makes you more money for the following reasons:
- You can charge more for your products than affiliate commissions because you determine your own prices.
- Physical items bring in considerably more money for dropshippers than affiliates do.
- You’re more likely to go viral or have a really effective commercial campaign.
- When running a store, you can have affiliates bring you traffic.
- When you dropship, customers are more likely to return to your website and buy more. Customers of affiliates, on the other hand, are more likely to visit the website to which you directed them.
- Goods are affordable (allowing you to set affordable pricing for customers while having higher profit margins)
- The daily workload is light, which saves you time.
- Because you’ll be your own brand, you’ll be able to reach a larger audience.
- You can tell if the product will sell well by looking at the order volume and reviews.
Is dropshipping legal?
Dropshipping is a totally legal order fulfilment model that many retailers and entrepreneurs employ all over the world. Anyone beginning a business, on the other hand, should always think about the laws of their selected business and comply to all necessary government policies.
To stay safe and out of trouble, we suggest:
- Carefully vetting your dropshipping suppliers
- Protecting yourself with a Dropshipping Agreement Contract
- Consulting a legal professional who specializes in dropshipping
Dropshipping legal requirements may range from country to country, as is typical, so make sure to thoroughly research your country’s standards.
Advantages of dropshipping
To talk about “is dropshipping worth it”, we need to know the benefits of this business model. For some entrepreneurs, the main advantage of dropshipping is that it allows them to launch an online store quickly without having to keep any inventory. Dropshipping, which doesn’t require you to buy the item until after you’ve sold it (and received payment), can bring solid income to hardly any speculation.
Following are only some of the advantages of drop shipping
- Sell anything you want
- Test the market
- More options for customers
- Reduced operating cost
- International expansion
- More flexibility
- Easier scalability
Sell anything you want
You can dropship almost anything you can think of. There are tons of dropshipping providers that can sell nearly anything you can imagine, and it’s easy to add new items to your e-commerce deals index as you need them.
Test the market
With dropshipping, you can test out which product lines resonate with our customers before you commit to actually storing them. In the event that they sell well and provide you with your ideal net revenue, fantastic! However, if they are not, you can decide to either keep them in your online store at all (for good measure) or drop them – there is no cost to you.
More options for customers
In case clients browse your site for an item and cannot find what they are searching for, they may leave and shop somewhere else. Dropshipping is a simple strategy for expanding product offerings and giving clients more options. With dropshipping, you can stock up on more of the things your customers want and entice them to spend more time with you.
Reduced operating cost
There is a cost every time you need to contact an item in the supply chain. Cargo, warehousing, inventory management, labor costs, picking, packaging, and transportation all add up. Holding charges, dead stock, and damaged or missing items all contribute to the total cost. Unfortunately, you can only pass on a small portion of your labor expenditures to clients without alienating them. In most cases, selling a dropship item is likely to be less expensive than stocking it yourself.
The internet allows for worldwide selling because practically everyone with access to the internet may visit your online store and make a purchase. By working with dropshippers, you may be able to form partnerships with businesses who sell things locally or provincially in countries where international shipping would be prohibitively expensive.
You may run your business from practically anywhere, even your home, for as long as you can communicate with clients and providers. There is no need for a dedicated physical space to operate your business since there is no consumer-facing façade and no inventory to manage.
Expanded sales also indicate increased costs in a traditional retail or online business store. There are more deals to be found, make do anything with, and fulfil. To handle all of the tasks required to keep the business running, you may need more stockroom space and personnel. Furthermore, if your business grows significantly, you risk having trouble fulfilling requests. A considerable part of the project is completed by your provider under a drop-ship strategy, allowing you to expand with little added expense.
What are the problems dropshippers faces?
Because you don’t have to store or manage inventory yourself, dropshipping can save you quite a bit of money on overhead. There are a few disadvantages and we need to know them to discuss that is dropshipping worth it or not.
Because you’re not buying things in bulk and paying someone else to handle requests and volume, your overall revenues from dropshipping are often lower than if you handled the full process in-house.
Online sellers regularly employ dropshipper products to enhance their real inventory. Dropshipping costs less money, but you only make a small profit margin because the drop ship supplier keeps the majority of the profits.
Dropshipping may not require a large initial investment, however the low cost of entry may lead to market competition in the dropshipping plan. The most well-known items are available from a range of online stores, with some even coming from other dropshipping providers.
Dropshipping products can quickly develop into product bargains, as you compete with other online company websites on price and popularity. Larger, more established businesses may drop their markup in order to provide lower prices, thus driving you out of the market. Customers may choose to buy from a well-known retailer, regardless of whether you can match their pricing.
Lack of inventory control
You control all step of the process in a traditional retail business, from marketing and promotions to shipping and customer care, so you always know how much inventory you have. Because you leave a big portion of your business to your dropshipper, the quality of their work is essential to your brand.
In the case of a problem with an order, the customer will contact you, and you need to contact the dropshipping provider to get a response. This back-and-forth makes it more difficult to solve problem as soon as possible.
While many dropshipping partners are good, there are a few shady individuals out there. You may come across a few service providers who present themselves as professional but connect in an inappropriate way.
Con artists, for example, may pose as brand representatives while conveying low-cost knockoffs. Customers will think you worthless if they receive low-quality stuff, so be cautious if you find a dropshipper who claims to supply designer items at dollar store pricing. If something seems too good to be true, it most likely is.
Less repeat business
When you’re selling other people’s stuff, it can be difficult to separate yourself. Buyers seeking deals will frequently shop where they can find low costs with little risk; as a result, many clients may compare shop rather than return to your store on a regular basis.
You could miss out on getting repeat clients, which is one of the most valuable things a business can do.
Managing multiple dropshippers
Many dropshippers choose to engage with a few different providers as soon as possible in order to expand their product selection. Using this technique may be advantageous, however, sending multiple items from multiple locations can increase fulfillment costs.
So if you want to know that whether dropshipping worth it or not. It totally depends upon your dedication, if you are looking for a quick profit then probably this business plan is not for you.
Dropshipping stores are not hard to imagine given how saturated the market has become. Studies show that 20 percent of new businesses fail in their first year.
But on the other hand, if your dedication and your strategies shines through, you are looking for a more than steady income and profits. So over all we can conclude that yes, dropshipping is totally worth it, especially in 2022 when most of the businesses have taken their roots in online businesses.
Do check out another great resource on setting up email for your WooCommerse store.