Dropshipping is a growing trend, but it’s not for everyone. There are many reasons why you should think twice about dropshipping as your business model. Here are five of the most common ones.
I’ve seen countless blogs tout the benefits of dropshipping; supposedly, it is a low-risk way of making a living while working at your own time and pace. With all those photos of men and women hanging out on beaches and partying on yachts with their laptops, making money while they enjoy their lives, it seems to be the perfect business.
But, it is too good to be true, isn’t it?
Yes, you are right, the real hustle is far far away from those fairy tales. So, is it still worth starting dropshipping in 2021? Of course, it is! But, now it is 100 times harder than it used to be. Here are five reasons why.
1. You cannot run a dropshipping business for free
Dropshipping is a low-risk way of making money because you do not have to spend any upfront capital on inventory and stock, so your risks are minimal right? Wrong! You need to invest in marketing – that means paying for ads like Facebook Ads, Google Adwords or Instagram ads if you want to reach new customers.
Of course, you can start dropshipping for free. And, you can even get your first few sales without having to spend a bean. But, if you want to grow your business and make more profits, you have to invest in marketing.
Therefore, before you start, make sure you have enough money to invest. It can be a successful business or it can fail. If it fails, you shouldn’t have invested more than you can lose.
2. Do not expect huge profit margins when dropshipping
Yes, dropshipping is easy to start and all, but it won’t give you the highest profit margins. Do not expect that your wholesale supplier will give you a very low price than the retail value of a product. As you can understand when you dropship, you will also place orders as you are getting orders. So, you can hardly get any bulk discounts, unless you get into a contract with a dropshipping supplier.
There is an age-old long question that how profitable is dropshipping. It all depends on many variables. Usually, you can make a few thousand bucks per month with dropshipping if you are super creative and be innovative in doing this business.
3. No solid way of handling returns
While returns are inevitable for any online business. But, it can be really frustrating when it comes to dropshipping.
One of the downsides of dropshipping (or any type of 3rd party sourcing) means that there is no concrete way to handle the returns. And, mostly as the retail seller, you will have to incur the cost of returns, unless you get into a contract with your dropshipping supplier.
This is one of the reasons that made dropshipping illegal on many platforms. If you don’t have a proper way to handle the returns, you will lose your customers trust and usually get kicked out from many dropshipping platforms.
4. Competitive price wars
One downside of dropshipping is that you will have a lot of competition in your niche. If you’re trying to sell in a competitive market, you’ll soon be carried away with a price war which can ultimately drain your profits. And, this is one of the reasons why most dropshippers fail. And, instead of making profits, you will end up losing your hard-earned money doing dropshipping.
So, if you ever start dropshipping, make sure to follow a good dropshipping pricing strategy to set your product prices.
5. Shipping Costs can drain your profits
With so many options available, it’s easy to fill your store with merchandise from many different suppliers through a dropshipping model. However, make sure that you understand all of the financial implications before trying this.
Let’s say that you sell pet toys online with dropshipping. And, assume that you have listed products from many different suppliers in your store. So, if your customer places an order for products from many of the suppliers, you will end up paying individual shipping costs for your suppliers. But, it is not practical to pass it on to your customer as multiple shipping costs.
That is why I always suggest using niche stores when it comes to dropshipping. So, you can easily pick one good dropshipping supplier and one backup to find your products.
In conclusion, I want to dispel the myth that drop-shipping is riskless. While there may be a less upfront financial risk with this model, it is not at all guaranteed to succeed. Should you start dropshipping? It may depend on how much risk you’re willing to take.