A Post to Help You Decide If A Dropshipping Business Is For You
It takes time, effort, and money to run a business. Make sure you’re in a business you’re interested in. If you’re passionate about what you do, you’ll dramatically increase your chances of success, as opposed to being in business just for the money and having no passion for the products and services you provide.
You could be running this business for the rest of your life. You may grow to love it; you may grow to hate it! When you have the option, choose something you’re passionate about.
Also, keep in mind that nothing is easy. A lot of people want to get into business because they want to be their own boss. Well, in business, you still have a boss, and it’s your customers. If you don’t get along with your customers, it’s the same as not getting along with your boss, and in business, it’s your customers that call the shots!
Now, let’s look at the dropshipping business.
What Is Dropshipping?
Dropshipping is a business model that allows you to sell products without the need to purchase and ship the product. You set your focus on making sales and building a customer base, letting your supplier take care of the rest.
The concept is simple:
- You market the products you have chosen
- You receive an order and accept payment
- You pay the supplier for the order and forward the customer information to them
- Your supplier will ship the product to the customer as if it was shipped from your store
The fine details of each step that your supplier takes are complex, which you don’t need to worry about. Just choose the right products and suppliers, and target the right customers.
The Pros and Cons of Dropshipping
Low Startup Costs
See Our List of the Latest Business IdeasThanks for dropping by. Before you leave be sure to have a look at our list of the newest business ideas to spark your creativity.
A dropshipping business has extremely low startup costs. On average, you can be up and running for under a thousand dollars, depending on the software and website you choose. Since you don’t own the product or need to stock it, all you need is an office set up, an online presence, and a marketing budget; then, you’re good to start.
No Inventory Cost
With this business model, your inventory costs are zero. You don’t own the product. Therefore, you don’t pay for the product, and you don’t store the product. This concept opens up a lot of opportunities to sell thousands of items. You can focus on one main category or on hundreds of categories. It all depends on your target audience and marketing strategies.
Easy Fulfillment Process
You don’t have to deal with getting the product to the customer; if you did, you would need to find the product in the warehouse, label it, arrange for shipping, track the order, etc. That’s a lot of work. With a dropshipping business, a third party deals with product fulfillment. You can focus your efforts on sales and marketing.
Sell and Test More Products
You can test many products since you don’t pay for the inventory. You’re free to try products to determine your best sellers. The more products you try, the better your chances of finding those hidden gems; the more hidden gems you can offer, the better your chances of success.
Offer a Large Selection with Little Investment
When you don’t own the product, you can offer a large selection with no extra investment except for the cost of creating the webpages to list the products.
With low startup costs for this business model, you can expect a lot of competition. Also, a lot of people believe it’s easy to succeed in this type of business, and that creates more competition.
It may be challenging to be unique because you are selling the same product everyone else is offering. If you come up with a way to be different, it can be easily copied by a competitor.
Being Highly Dependent on Other Businesses
You don’t own the products; therefore, your control is limited. You can’t make decisions without consulting the wholesaler. For example, if you want to create a sale on a product, you will need to verify the orders can be filled before creating the sale.
Another issue to be aware of is that if you depend on one wholesaler, and that wholesaler goes out of business, your business will be out of stock until you can find another supplier.
Regarding shipping, again, you are not in control of this. Your supplier may deliver in an acceptable time frame, or they may have horrible delivery times, which will affect your success.
With this business model, the profit is split between the manufacturer, the wholesaler, and the retailer. There is only so much profit available. Therefore, some dropshipping businesses focus on low profits with high sales volume to make the business profitable.
Limited Customer Service
You’re the middleman, so your customer service is limited. Your supplier controls the products, deliveries, and warranties if there are any. Keep in mind you are the one selling the product, and your reputation is at stake.
What Type of Product Will You Sell?
The types of products you sell are a major factor in how much profit you earn and how successful you’ll be. It’s easier to market products in which you specialize in, than marketing to a broad audience.
Below are a few considerations and questions regarding product selection.
- Product availability
- The quality of the product
- What is the price range for your target customers?
- How easy is the product to ship?
- Is there a demand for the product?
- Is there a lot of competition for the product?
- Is the market saturated with these products?
- Can the product be shipped worldwide?
- Are there any regulations regarding the product entering certain countries?
How Will you Market Your Products
How you promote your products is one of the major keys to becoming successful. There are many ways you can do this. In my opinion, I would start with one, and when this process is optimized, then expand into another source to market.
For example, you can start with Facebook ads; once it’s tweaked, you can move on to Google ads and so on. Don’t try everything at once, as marketing takes time, effort, and constant optimization for the best results.
Your profits will depend on a variety of issues, including the profit margins of the products, your operating costs, and your marketing costs, which is a large part of your expenses.
The average for the industry is roughly 10% to 40%, which is an idea of what you can expect.
An important factor is finding the right suppliers. When you find the right one, your chances of success are greatly increased. If you find the wrong one, it can put you out of business a lot quicker than the time it took you to get started.
When choosing a supplier, you need to consider the following:
- Does the supplier have a good reputation?
- Where does your supplier ship? Is it worldwide or in certain regions?
- What type of warranties are offered?
- What profit margin can you make?
- How long does shipping take?
Getting Started With a Dropshipping Business
- Researching Your Business Idea
- Writing a Business Plan
- Funding Your Business
- Choose a Location
- Choose a Business Name
- Get Your Tax ID
- Define the Type of Company You Will Form
The above are some of the steps you’ll need to address. I have put together an article for all the details, plus some very important points you will want to consider before you start any business. See The Essential Steps To Start a Business for all the details you’ll need.