Learn if dropshipping is worthwhile. These are the six things you should consider before establishing a dropshipping business.
If you use social media, you’ve definitely seen influencers promising entrepreneurs that they, too, can make thousands of dollars in side income from a single dropshipping business. You may be wondering if dropshipping is a worthwhile investment.
As a dropshipper, you can build a great, profitable internet business, but there are a few things to think about before going down this path. Read on to find out whether dropshipping is right for you and how to get started.
Understanding dropshipping
It is a viable business concept that involves outsourcing the order fulfillment procedure to another company. In a dropship business, you have no physical interaction with your inventory. Instead, you obtain things from a supplier and put them on your own online store or marketplace. When you get an order, it is sent straight to your supplier, who then picks, packs, and ships the dropshipped products to your clients.
Is dropshipping worth it in 2024?
It is still worth the investment if you’re looking for a low cost, small business idea. The number of people searching the term “dropshipping” has increased exponentially from 2004 through 2024.
The process of starting a dropshipping business is relatively simple:
- Create an online store.
- Find a dropshipping supplier.
- Select your products.
Then, watch the money roll in—right?
Not always. Opening your first dropshipping store can need a significant commitment of time and attention. This guide discusses if dropship is worth it, as well as six things you should know before starting your own online dropship store.
The advantages of dropshipping
It is a popular way for new business owners to begin earning money online. That’s because the dropshipping business model provides the following benefits.
Low barrier to entry
Dropship inventory does not require a significant investment from new entrepreneurs. Once you’ve sold a product, the dropshipping supplier will handle order fulfillment and shipment.
What you do need, however, are good promotion and branding skills—particularly if you’re in a competitive sector. If you aren’t sure in your marketing skills, you can take free online courses.
Flexibility
Dropship is not like working 9-to-5. Sell as many (or as few) dropshipping products as you choose through your store. It’s a scalable ecommerce company strategy that lets you work when and where you want.
According to Caleb Dueck, head of operations at Sperry Honey, “Print on demand is a great dropshipping model because you add additional value to the product with your design.” Because your print-on-demand platform sends the order directly to the consumer, you retain the benefits of outsourced fulfillment while still offering your own distinctive product.”
Simple testing
Since other tasks—like order fulfillment and shipping—are taken off your plate as a dropshipper, your main focus is testing which products sell best. It’s why some entrepreneurs consider dropshipping a crash course in ecommerce marketing.
6 things to know before starting a dropshipping business
1. Is dropshipping profitable?
Our data suggests that the average ecommerce entrepreneur spends $40,000 in their first year of operation. Product-related costs are typically the most expensive, accounting for over one-third of total annual spending.
Other common ecommerce expenses include:
- Operating costs (e.g., insurance, taxes, permits)
- Online store costs, such as your Shopify subscription plan and domain name
- Staff costs, if you’re building a team for order fulfillment
- Marketing costs, like social media ads or branding.
It allows you to dramatically reduce your product and fulfillment costs. Because there is no need to invest in developing new products, your product costs will be limited to sampling existing products. Instead of budgeting for order fulfillment personnel salaries, your dropshipping provider handles the process for you.
However, the freedom from fulfillment, shipping, and returns comes at a cost. Dropshippers frequently pay a premium to get merchandise from suppliers. With so many companies providing equivalent things, there is frequently a limit to how much profit you can make on each item.
Marketing is typically the most expensive aspect of dropshipping. In a competitive market, how you position your product is important. If competitors are selling a less priced version of the same dropshipping product you provide, creative digital marketing might assist persuade customers that you’re worth the extra money.
Your dropshipping business’s profitability, like that of any other business model, is determined by selecting the right products to offer at the correct rates.
2. How competitive is dropshipping?
It is an appealing business concept for entrepreneurs wishing to sell things online because it can be started by anybody with a small initial expenditure. That makes it competitive—especially if you offer in a popular dropship niche.
Despite the lack of official study data, dropship experts believe that 10% to 20% of dropshipping enterprises succeed.
To stand out from the dropshipping competition, use strategies like:
Choosing a less crowded niche
“Charging extra for the same product when you don’t add any value isn’t a viable business model for the long term, since the low barrier-to-entry means more competition and less differentiation,” says Caleb.
Building a brand
Cole Turner, who made millions through his dropshipping store, says: “The only way to be successful in dropship business nowadays is to have a real identity as a brand, and have a real legitimate business, even if it’s not legit to start with. If you’re still shipping from AliExpress, you still have to be believable. People have to trust you.”
Prioritizing customer service
Dropshippers often fall into the trap of focusing solely on marketing and neglecting existing customers—despite the fact that existing customers are more likely to purchase products you’re selling.
“Dropship [is] still a massive part of a merchant’s journey,” says Brian Peters, partnerships lead at Shopify, “and there’s always an opportunity to do it better—more quality products, faster shipping, better search/UX, etc.”
3. How long does dropshipping take to succeed?
Despite being a low-risk business concept, dropshipping requires a significant investment of work before making your first transaction.
Dropshipping success will entail the following:
- Starting an ecommerce store
- Sourcing new products
- Finding reliable suppliers
- Marketing your products
- Building a brand
Expect to work at least 10 to 15 hours each week to make $2,000 in monthly revenue from your dropshipping business. However, as with any small business, the more time you invest, the more likely you are to generate significant money.
Our experience indicates that it will take at least 12 months of full-time labor on your dropshipping business to replace an average full-time salary of $50,000.
4. How do you get the right dropshipping suppliers?
You can have the most effective marketing campaigns in the world. However, if clients are dissatisfied with the products they receive (or do not receive them at all), your dropshipping business is likely to collapse.
“Navigating supply chain complexities, such as shipping delays and quality control issues, requires proactive management and effective communication with suppliers,” explains Adam Garfield, Hairbro’s marketing director. “Despite these challenges, dropshipping offers flexibility, low initial investment, and scalability, making it appealing for aspiring entrepreneurs.”
Dropship store owners can connect with thousands of suppliers on websites such as Alibaba and DSers. Thoroughly vet any dropshipping vendors you decide to work with.
While vetting dropship suppliers, pay close attention to:
Shipping estimates
Online buyers prefer rapid, free shipment. Consider whether you can provide this service by gathering estimates on shipping times and pricing from several providers.
Reviews and ratings
To improve quality control, check reviews from other companies using the same dropshipping supplier. Is the product quality up to scratch? Does it arrive with any defects? Is their order fulfillment process fast enough to meet delivery promises to customers? Do they accept refunds on your behalf?
Customer support
The most successful dropshipping suppliers value feedback and offer prompt customer service. The most crucial dropship tip is to accept your supplier’s faults. Hold suppliers accountable for their mistakes, but when engaging with customers, always accept responsibility and look for methods to make amends
5. How big of a priority is dropshipping customer support?
The significance of prioritizing customer assistance should not be overlooked. When a customer orders an item through your online storefront, the details are automatically sent to your dropshipping provider. It is their job to choose, package, and ship the item to your consumer. Something will inevitably go wrong at some point during the process, and it is up to you to mitigate the impact of any unpleasant customer experiences by accepting responsibility for your supplier’s errors.
Although collaborating with trusted suppliers will reduce the amount of time you spend assisting consumers, it will still take up a significant portion of your time running your company.
Best practices in customer support include:
- Communicating delays proactively, such as updated delivery times
- Maintaining strict quality control standards with your suppliers
- Asking for another chance if a customer’s order shows up wrong (e.g., offer a coupon code on their next order)
- Making support easily accessible by including an on-site chatbot and links to FAQs in your order confirmation emails
These customer service best practices can assist you in avoiding situations where clients openly complain about your store on social media. This is critical to prevent, as social media complaints can deter up to 93% of online customers from acquiring one of your dropshipped products.
6. Is dropshipping legal?
It’s totally legal to operate a successful dropship business, but there are some details you need to consider before setting up shop.
Business structure
Each type of business structure, whether sole proprietorship, LLC, or C corporation, has unique advantages. As a dropshipper, nevertheless, an LLC can afford more protection. With an LLC, you are not personally accountable for any business debt, such as overpaying on marketing.
Taxes
Dropshippers need to pay sales tax if the state you operate from collects it and an order is placed by someone living in your state. You may also need to pay income tax if you draw a salary from the business.
Contracts
Consult a lawyer to draft a dropshipping partner agreement and protect yourself in the event something goes wrong with suppliers.
Ecommerce policies
When potential customers consider purchasing from your dropshipping store, you’ll need to provide them with privacy, shipping, and return policies.
Business insurance
Risk increases as your dropshipping business expands. Consider getting company insurance to protect yourself.
The future of dropshipping in 2024 and beyond
The dropshipping sector is expanding at a surprising rate, and it is not expected to slow down anytime soon.
However, with so many entrepreneurs turning to this business model as a quick method to make money, you’ll need to put in a lot of effort to set your new dropshipping firm apart from the competitors.
That is especially true if your target market comprises young people. “Millennial and Gen Z consumers are more aware of dropshipping than years past,” states Caleb, “and those younger purchasers understand that they can just buy those products for a cheaper price on sites like Temu and Alibaba.”
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