What Are the Pros and Cons of Dropshipping?
eCommerce is something so many entrepreneurs, both new and experienced, consider trying out. Everyone is going to online to make purchases and many merchants prefer dropshipping, so it only makes sense you’d want to get a piece of the pie.
If you look at research from resources like Wise Merchant, you’ll see that it’s highly competitive, however, and a lot of people aren’t going to succeed. Some of the factors that play a big role in your success include your willingness to learn what you don’t know, doing the research to find the right niche and products, and your perseverance.
You’ll also have to decide not only your niche and what types of products you’re going to sell, but where you’ll source them from. One option is dropshipping, and there are some strong proponents of this form of eCommerce, as well as some equally strong critics.
The following are some key pros and cons of dropshipping to keep in mind.
Simplicity and Convenience
With dropshipping, you don’t have to maintain an inventory. You don’t have to source products and work with a wholesaler or manufacturer. You don’t have to ship the products out, and the overhead is incredibly low.
Basically, when you’re a dropshipper, you have the simplest form of eCommerce available, aside from maybe selling digital products.
If you want to be able to work from anywhere and have no geographical restrictions, dropshipping can offer that.
The time that you’re saving on other areas of running an eCommerce business such as packaging and shipping orders can be put toward more strategic tasks such as marketing and advertising.
Along with overhead being low, you don’t have to worry about making a big initial investment to purchase inventory that may never sell. If you’re just starting an online business and you don’t have a lot of money to spend, dropshipping may be your only option.
Starting any business requires some trial and error, but if you purchase inventory and something doesn’t work, you may be out of luck. With dropshipping you have fluidity in your business. If you find that customers aren’t responding well to a specific product or a type of product, you can easily make a change. Also, if trends change it’s easy to change your store in line with that evolution.
Everything so far has been a pro of dropshipping, but what about the cons?
One big one is the low margins. If you’re working with a dropshipping partner, they’re going to be doing most of the work, and they’re going to charge you accordingly. You have to be driving a lot of traffic to your site and making a lot of sales in most cases if you want to see any real profitability.
In the crowded eCommerce space, you want to be able to set yourself apart and differentiate yourself. It’s tough to do that with dropshipping because other people are going to be selling the same products as you.
The suppliers you’re working with are selling to hundreds, thousands or even tens of thousands of other retailers.
You can set yourself apart with marketing or by offering lower prices, but that further cuts into profitability.
Loss of Control
Finally, if you’re someone who likes a sense of control, dropshipping probably isn’t for you. You have no control over when items get shipped, and you don’t even know if a customer is going to place an order only to find out the item is sold out or back ordered. You’re leaving almost everything up to your dropshipping partner, but if there’s a problem, it’s your store that’s going to have to deal with customer service and potentially get bad reviews.