Is Dropshipping worth it? The truth about Dropshipping
With e-commerce raking in $2.5 trillion, it is no question why everyone is flocking to it in one way or another. While the e-commerce market is booming, it is not because of what you think. Many are of the idea that you need a product of your own to start a business. While it is not wrong, there are other means to go about it.
A few years ago, I was looking for ways to diversify my income streams. I wanted to work online from home, but I didn’t know how to start.
After browsing the internet for a few days, I came across the wholesale ted YouTube channel, where I heard about dropshipping for the first time. I decided to follow one of her free courses on how to build an online store. Below, I share my personal experience in building a dropshipping store.
If you want an occupation that would make you an overnight millionaire, dropshipping is not for you. The truth is dropshipping is worth it if you are in the online market to build a sustainable income. It is a proven business model that started before the internet in the 60s and has a low barrier of entry.
As with any other venture, for success to occur you have to be willing to dedicate time, effort, and your own money. Many of the success stories in dropshipping will let you know that patience is a virtue in this business. It can take 6- 12 months of business before you can see real profit, but many don’t last that long because they lack the patience.
Dropshipping is a flourishing business that experienced continuous growth over the past few years. SaaS eCommerce platforms or website builders like Squarespace, Shopify, and BigCommerce are hiring to face the rising demand of building online stores. Here is a graph from Google trends showing the growing interest over time for dropshipping.
What is Dropshipping?
Simply put, dropshipping is a form of retail business where a store/business owner accepts orders from customers without having the required goods in stock.
The dropshipping model is based on third-party inclusion in a purchasing process. The store owner buys a product from its manufacturer and has it shipped directly to the customer.
In the dropshipping model, the store owner does not come in contact with the product at any point. Another way to describe dropshipping is a type of venture where the store owner acts as an intermediary between the manufacturer and consumer.
A major distinctive feature between the retail market and dropshipping is that the business owner/ merchant does not stock the product. The product is instead purchased from a third party and sent off to customers.
As mentioned earlier, dropshipping is not a venture that can make you rich overnight. While it does seem like easy money, buying and selling someone else’s product, the turnovers do not work that way. It takes months and sometimes years to build customer relationships.
There is a phase of proving why a customer should buy from you when they can easily purchase directly from the manufacturer. There are also drawbacks including, finding a reliable manufacturer that will deliver the right products every time since the store owner will not come in contact with the product.
In dropshipping, some legalities need to be monitored closely so that your business does not err on the side of the law.
Is Dropshipping Legal?
Many critics of dropshipping focus on the idea that selling someone else’s product to a consumer that you have no contact with has to be illegal. Contrary to what those critics think, yes! Dropshipping is completely legal. To an average onlooker, dropshipping looks like a scam because it seems like you, as a store owner, are being paid for nothing.
The belief that store owners are getting paid for doing nothing is where many get it wrong. While dropshipping is legal, there are legal foundations that should be covered before you delve into this retail model.
The regular business qualifications such as applying for an LLC, registering your business name, applying for a federal tax ID number, business insurance, and licenses do not necessarily apply for dropshipping.
Although these do not apply for transparency with your customers, it is better to have some of these things on hand. It is also best to keep in mind that transparency helps build customer relationships.
In a scenario where a customer finds the product you sell on your manufacturer’s site and notices that you are charging more, or notices that the name on the invoice does not match with the business it is being purchased from, the customers’ trust is gone.
When dealing with a wholesaler, you are not required to inform them that you are dropshipping their product, but informing them can be beneficial to you than not. Informing wholesalers of your dropshipping intent can keep you updated with stock supplies and provide a blind shipping option.
Blind shipping is when a business removes its name from the bill of lading (BOL) before the product is shipped to the customer in eCommerce.
Is Dropshipping hard or easy?
Compare to other eCommerce, dropshipping is an easy business to start. However, it can be hard to scale without a good marketing strategy. If you are good at product selection and online marketing, your business may experience quick growth.
You may need to hire a virtual assistant due to the multitude of tasks required to run a successful online business. Statistics have shown that 27% of eCommerce businesses have adopted the dropshipping method, with this number set to increase every year. Such an increase leaves most people believing that dropshipping is easy.
To accurately explain the state of difficulty of dropshipping, there has to be an understanding of how the dropshipping model works. When the shop is live, your main tasks are:
- orders fulfillment
- customer support
- inventory management
- price monitoring
Contrary to popular belief, dropshipping is not a passive income stream. Although many automation tools made it easier, not everyone manages to make a living from it.
Choose a niche
There are numerous products available on the eCommerce market, but not all products are being purchased. In starting a dropshipping business, you have to select a niche (a specific market area).
One of the ways to have a successful dropshipping business is to specialize in a profitable niche. Niches can be gotten by studying the market, working in a field you are passionate about, noticing a societal need that isn’t being met, etc.
The value of a niche is not only determined by the number of products available or trends. It is also possible to find one or two evergreen products with enough demand and a cheap/free way to get new customers.
Study the competition
After selecting a niche, the next step is to study the market. If your niche is already saturated, it is good to research the business patterns of others in the same field. This method will allow you to spot where they are lacking, what works for them, and what you need to do to stand out in the field.
You may need to consider another niche if the competition is too high and the cost of acquiring new leads impact strongly your ROI. Competition is not always a bad thing because it means people are willing to spend money on what you offer.
Find a supplier for your dropshipping store
As a dropshipping business, you do not come in contact with the product in any way, which is why you need to have a reliable supplier. A reputable supplier will ensure that the product is always delivered on schedule and in good condition, thereby building the trust of your clients/customers.
Choosing a good supplier relies on many elements such as:
- location: domestic vs overseas suppliers
- shipping time, area, and cost
- wholesale vs private label dropshipping
- print on demand business
- blind shipping option
- MOQ and ability to deliver a specific number of items
Ordering a sample is also a good way to vet a supplier and test the product. Alibaba and Alliexpress are two well-known suppliers based in China but there are many other reliable ones that have warehouses in the US and UE for fast dropshipping.
Set up your online shop
With the avenue of a supplier and niche settled, the next step is to create your store. WordPress, Wix, Shopify, BigCommerce, Squarespace, eBay, and Volusion are a few good website builders suitable for creating an online store.
For a beginner, building an online store can be a little overwhelming. The best way is to find a course or a mentor that will help you stay focused and save time. It took me three weeks to build my first shop from scratch with no previous experience. You can take less time if you choose a one-product store.
Here are a few steps to creating your first profitable online store:
- Pick your store builder
- Select a theme
- Personalize the theme settings: fonts, margin, colors, appearance, etc.
- Branding: add logo and favicon
- Upload your products
- Optimizing: product description, price, infographics, and/or videos
- Set up shipping fees and location
- Integrate payment method
- Design and optimize checkout page (extremely important)
- Connect your store to an online marketing platform like Getresponse to increase sales with email automation
Promote your store
Getting consistent traffic is one of the most important parts of any eCommerce. Even with the best offer, you will not make money without people visiting your website. As soon as your store is live, you should focus on traffic. If you feel lost, think about taking a course or ask for help to manage lead generation.
You can invest time to create content that drives free traffic to your listing:
- social media traffic
- personal blog
- free blogging sites like Medium, Tumblr, and blogger.com
- free classified ads
- Q&A websites like Quora
You can invest money on paid targeted traffic to get faster results:
- Facebook ads
- Google ads
- Bing ads
- press releases
- Influencer outreach
- traffic provider like Toboola
The difficulty of dropshipping comes from knowing a bare minimum on each aspect of the business.
Study results and adjust
A key to growth in a business is adaptation. Analyze traffic, sales, return customers, conversion, bounce rate, trends, and your best-selling products. This will tell you what is working and what you should avoid. You will know how to adjust accordingly. These steps are how you create a successful dropshipping business.
While they seem direct and easy to handle, the challenges in dropshipping are found in getting everything right. It is easy to start but hard to maintain long enough to become successful.
Is Dropshipping on eBay worth it?
As of 2019, eBay had a customer base of 183 million people. Numbers like that explain why many store owners are looking to eBay for their dropshipping business.
But how does it work? While dropshipping on eBay is allowed, it comes with some restrictions. eBay only allows you to dropship products from a wholesaler and not a retail store. Most wholesalers would require you to buy products in bulk and not a single supply, which puts you at a disadvantage if you are on a low budget.
You would have to hire the services of a product fulfillment brand to ship customer orders.
The dropshipping model operates with the seller acting as an intermediary between suppliers and customers but using eBay more or less adds another middle man. Dropshipping on eBay would also require that you make an upfront payment for a product without the surety of the products selling out.
Rather than using the customer’s funds, you would have to use yours. All eBay provides in this sense is access to a customer base, but product delivery, marketing, and shipping are up to you.
In essence, No! Dropshipping on eBay is not worth it unless you find a loophole or try a unique approach. Paul Lipsky is one of the rare people who has created a simple but yet effective method of eBay dropshipping.
Paul has managed to sell over one hundred thousand dollars worth of products online each month. He has created the course eBay dropshipping titans to help people like you build a straightforward profitable business on eBay.
Is Shopify Dropshipping worth it?
Shopify has over 1 million business owners utilizing the website to sell their products with a $2.9 billion revenue. For a website to be trusted by this many people as their store, the results have to be promising.
Based on that alone, yes! Shopify dropshipping is worth it. Shopify has solidly built its brand and earned the trust of entrepreneurs. But it is the features that Shopify offers that make it worth using this platform for dropshipping. Some of the features Shopify offers are;
- An app store that can supplement all your entrepreneurial needs
- Access to your customers and site information (email and website resources).
- Low entry barrier. Anyone can start a store on Shopify.
- The price of goods is deducted after the product has been purchased from your store.
- Shopify allows single sales on products, meaning that you do not have to buy in bulk for your store.
Building a Shopify store is doable even for beginners. There are plenty of free tutorials on YouTube and affordable paid courses that will teach you all the basics and more. You can benefit from the 14-day free trial and follow the free course of Sarah Crips to build your first store.
Is Amazon Dropshipping profitable?
If profit is a goal in your dropshipping venture, then No! Amazon dropshipping is not profitable. Amazon, like eBay, allows dropshipping but has a list of requirements that need to be met to avoid your store being penalized. Amazon requires that;
- You are the seller of your products.
- Comply with seller agreement rules and Amazon policies.
- All invoices, packaging slips, and order charts have to list you as the seller of the product.
- Be responsible for all customer product returns.
- Remove all traces of a third party before the shipping of the product
Like eBay, Amazon does not permit the purchase of goods from a retailer or another store that is already on Amazon only to sell the product on the same platform. For this reason, you would have to bulk buy products.
Bulk buying does not automatically turn into sales. While the goods can be stored in the Amazon warehouse, a fee would have to be paid once the goods remain in storage for more than six months.
The requirements on Amazon are closely monitored, and a slight slip-up can result in your account being banned. In between product fees, storage fees, and keeping in line with Amazon policies, the profit margin is lowered making dropshipping unsustainable.
Etsy Dropshipping: Does Etsy allow dropshipping?
The Etsy marketplace has 2.1 million entrepreneurs on it, but how many of those entrepreneurs are dropshipping? The Etsy marketplace is known for handcrafted and vintage goods which do not necessarily fit into the dropshipping ideal. S
speculation is that dropshipping on Etsy is illegal, but the Etsy policy statement does not explicitly mention dropshipping. The policy states that reselling is not allowed in the handmade category on Etsy, which leaves the vintage section open.
Dropshipping on Etsy might seem promising, but it is hardly a sustainable venture. The marketplace only technically allowing you to resell vintage items puts you at a loss because it limits the orders that can be placed on an item.
For products to be listed on Etsy, you have to pay a listing fee of $0.20, which expires every four months. There is also a retailer/wholesaler ban on the site.
Facebook Markeplace Dropshipping
Facebook offers the most potential customers than any other site/ marketplace with its monthly user count that is close to 3 billion. This large customer base is why many have looked to Facebook as a marketplace for dropshipping.
Dropshipping on Facebook is allowed and very legal, but sadly, the large user base does not always lead to good sales. The Facebook marketplace is only available in a small number of countries and only offers purchasing/selling deals within your local community.
To maximize the most of Facebook in your dropshipping business, we suggest that you lean more towards the advertising capabilities of the site.
Dropshipping on craigslist
Although Craigslist is not the best place to make money from an online store, it is worth trying if you want to drive free traffic to your store. It is not a scalable method, but it can help you get your first sales and some precious reviews. Plus, getting sales from free traffic allows you to have a positive cash flow and invest later in paid campaigns.
Go to Craigslist and search the larger cities. Your goal is to post ads in a few of them. You will choose the correct section and location depending on what you sell. For example, if you are selling security cameras for apartments, you can post your ads in an area where there were recent burglaries. Do not post the same ads in multiple cities at once because Craiglist will probably shut down your ads.
Pros and Cons of Dropshipping
For every business you venture into as an entrepreneur, there will always be drawbacks and benefits. The dropshipping model is not exempt from this.
The pros of dropshipping are:
- Low start-up capital: Dropshipping is a business anyone can venture into with as little as $0 since all you need to do is have demand from a customer and place the order to your supplier. Your money does not have to be involved in the process whatsoever.
- No need for a physical store: the dropshipping business model is created in a manner that you, as an entrepreneur, do not have to come in contact with the product in any way. This means that your business can operate from anywhere without the need for a warehouse or a physical store since all communication would be done online.
- The low-risk business: with none of your funds in the business, you are exposed to very minimal, if any, financial risk.
- Steady passive income: dropshipping is one of the few business models that can make you money with minimal effort on your part.
The cons of dropshipping are:
- Scarce reliable suppliers: it isn’t always easy to find a supplier who will deliver goods on time and in good condition.
- High competition: with over 1 million users on the popular marketplaces, it is almost impossible to find a profitable niche that is not saturated. The competition for customers is high in dropshipping.
- Lack of control: the availability of products is not in your hand unless you disclose your dropshipping intention to your supplier. There is also the inability to make your packaging unique since it never comes in contact with you.
Is Dropshipping Profitable?
The Coronavirus pandemic has left many people in their homes looking to eCommerce as a way of getting products. The eCommerce market has seen a 7% yearly growth with dropshipping profits of over $4 billion.
With that said, Dropshipping is very profitable, and many earn $100,000 yearly from dropshipping alone. The low riskiness of dropshipping makes it easier to earn from than other eCommerce business models.
Dropshipping Success Stories
Many dropshipping success stories exist, but Irwin Dominguez, Meowingtons, Notebook Therapy, and Juan Valdez are notable names.
Irwin Dominguez: within eight months of opening his Shopify store, Dominguez made $1 million in profit with dropshipping. His niche is never specified, but Irwin does encourage knowing when you have gotten the most out of your niche and when to find new products. On a good day, Irwin rakes in $30,000 in revenue. Irwin also mentions Facebook ads as why his store is so successful.
Meowingtons: this store proves that popular niches aren’t always the most profitable. Meowingtons specializes in all products cat-related. Most of these products are purchased from Aliexpress. The store was created in 2014 and has maintained its cat-centric theme from the very beginning. The store utilizes social media as a marketing means.
Notebook Therapy: this store specifically stocks Japanese-style notebooks. A Salesource audit shows that this dropshipping store makes between $350,000 – $700,000 monthly. The marketing strategy of this store is heavily reliant on social media, with their Instagram following exceeding 1 million.
Juan Valdez: Inspired by teenagers selling fidget spinners, Juan Valdez and his business partner created their Shopify store in 2018. Juan’s success story lies in his ability to analyze the faults of his store and adjust accordingly.
Juan and his partner started out maximizing Facebook ads, but when they realized that it wasn’t providing the results they wanted, they switched to Google ads From this change in their marketing strategy, Juan took up eCommerce courses and saw an increase in his monthly profit to the point where he was making $240,000 every month.
The truth about Dropshipping
If you are in the market for a business that will make you a millionaire overnight, dropshipping is not for you. Even the millionaire, Irwin Dominguez, spent eight months making a million. As a small start-up brand, it will take time and effort to build your brand.
The competition in dropshipping can be intensely high with the most profitable niches already saturated. With that said, dropshipping is one of the few businesses one can be a part of with minimal risk.
The benefits of dropshipping are rewarding but only to those willing to put in the effort. You can also try drop servicing if you prefer to sell services or high-ticket dropshipping if you want to make a living selling only a few items a month.