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I put up a dropshipping store in 2018.
Now, I have another dropshipping store—doesn’t make me a millionaire but it surely helps pay for the bills.
I failed in dropshipping the first time because of for several reasons. If you make the same mistakes I made, you may also fail in dropshipping. I was naïve and thought it was an easy way to make money.
I built a women’s general fashion clothing store. I thought the market was huge.
But I didn’t know what I was doing.
And it tanked.
RELATED POST: The Top 5 Reasons You Will Fail at Dropshipping
While I received customer inquiries here and there, nobody bought anything. After six months of operating it with no sale, I shut it down.
I do not want to bore you with what dropshipping is and how it works. You are here because you are weighing the pros and cons of dropshipping, and you have come to the right place.
Take a look at the trend of dropshipping as a search term below:
At an index score of 97, there surely is a worldwide interest in this business model.
If you go to YouTube, there are so many channels dedicated to dropshipping, the biggest of which is Franklin Hatchett.
What are the pros and cons of dropshipping, and why should you even consider doing it?
Today, I will share with your 10 pros and 8 cons of dropshipping. All of these are based on my experience.
Let us get started
10 PROs of Dropshipping
1. No Inventory to Keep
If you currently own a physical store or have operated one before, you must know how cumbersome it is to manage inventory.
Also, an inventory is costly.
You have to buy your products in wholesale, stock them in your business or house, then worry about selling them later.
All products you have in your physical possession are money that is just sitting right there—money that may not turn into cash. If you do not sell them, it is a loss.
We used to have a gown shop business in 2012. We had about 100 gowns that we rented out to clients, but the sales weren’t good.
We eventually had to close the shop and give away the inventory for free.
The beauty of dropshipping is that you do not have to keep an inventory.
Why? Because you only buy what you have already sold.
In dropshipping, all you have to do is to post a supplier’s products in your online store and then wait for a buyer to make a purchase.
Once that purchase is made, that is the only time you buy the item from your supplier, and your supplier ships the item to your customer.
This is great for the following reasons:
- You do not pay for the product and store them
- You do not have to buy several sizes (for example: shoes and clothes)
- No product gets damaged because you do not keep them
- You do not lose money for unsold inventory
This is the first and most important benefit of dropshipping. With no inventory, you significantly reduce your losses.
2. Low Operational Expenses
The second advantage of owning a dropshipping business is that it involves little overhead costs compared to other business types.
If you open a brick-and-mortar store, you have to pay rent, utilities, and other bills.
This simply does not happen with dropshipping.
Overhead costs or operational expenses refer to financial liabilities related to running a business.
Considering that you don’t need to buy or rent a warehouse, there are a lot of things that you can cross off your “to pay” list.
In dropshipping, you do not have to pay for:
- Power or gas
- Store materials like racks or hangers
In dropshipping, you only have to pay for:
- Web hosting – costs less than $7 a month if you use SiteGround
- Web-builder tools – I use Elementor, and it only costs $49 per year
And there is nothing else to pay.
Unless if you employ the services of a freelancer. Pretty much, you do all the stuff in dropshipping on your own.
As far as ads are concerned, this is not a monthly cost. It is completely up to you if you want to run ads or not.
If you do not want to pay for a web host and a web-builder, your other option, which is also the most popular one, is Shopify.
Shopify is an all-in-one e-commerce store builder. You can build a store in less than a day.
I used Shopify on my first store, and I have to say that it is easy to use.
It is worth at least $29 per month.
RELATED READING: Shopify Pricing: What Are the Different Features Between the Plans?
3. Easy Start-Up Process
A Shopify dropshipping store is relatively easier to set up. It does not require any technical know-how.
If you build a dropshipping store with a web hosting service and WordPress like I did, you need to know a little about building a website from scratch.
This does not mean that you need to code. It’s just that you should know how a CMS like WordPress works because you have to install several plug-ins to make your store better.
You can take online courses to start dropshipping, which you can buy for no less than $199. There are free YouTube courses out there, too.
To start a dropshipping store, you only need:
- A store
- Dropshipping suppliers
- A marketing plan
The supplier is free, and the marketing plan is free.
For your store, you can either choose the web hosting route like I did or just get a 14-day FRE trial Shopify plan and open your store in less than a day.
I prefer a web hosting plan because it gives me flexibility in designing my website the way I want to.
Dropshipping won’t also require you to have your own business license to operate. You can start your store with no registration, and only register it once you are earning profits.
This, of course, is advice that you have to take with a grain of salt. Not all countries have the same laws.
4. Less Work to Do
One of the pros of dropshipping is that the dropshipping suppliers are the ones responsible for shipping the goods.
Do you know what this means?
You do not have to go to the post office and ship the goods.
You do not even have to print your shipping label.
In dropshipping, all you have to do is to order the item from your supplier, use your customer’s shipping address as the shipping destination, and let the supplier do everything.
Your only primary task is to market the products to your target market and forward the orders to your supplier.
This being stated, it is evident that you will have a lot of time on your hands because you are doing less work.
This will help you spend more time on promotional and marketing activities to help boost your sales.
You will also be able to focus on improving your business because you don’t have a lot of work on your plate—the supplier does the backbreaking job product handling and shipping.
5. Minimize Your Financial Exposure
Let’s go back to the previous pros in order to justify this benefit.
First, the advantage of not keeping an inventory does not only reduce the risk of overstocking: it completely eliminates it.
Take note that in dropshipping, you only buy a product once a customer orders from you.
This means that you don’t need to worry about financial loss for the inventory that you never sold.
Since you only pay for the product once a customer orders, your profit is guaranteed.
Similarly, not being required to set aside a large capital amounts for stocks and/or a physical store means that you don’t have to endure losses if your business goes bust.
Our gown shop?
Our two restaurants?
I was exposed to the tune of no less than $52,000.
With dropshipping, my exposure is no more than $50 per month.
6. Flexible Business Model
Unlike other businesses wherein there are only a few platforms to choose from, dropshipping is a very flexible and adaptable business.
In dropshipping, you can maximize many marketing channels and platforms.
Here are some examples:
- Social media
- Affiliate marketing
On top of your marketing avenues, you can operate your business no matter where you are. You can be on the beach sipping a martini, and you can process orders from there.
On top of this, you can always change the content of your store as the times change.
This is critical in sales. Technology and fashion change so quickly. If you are keeping your own inventory, you may not be able to catch-up with the times—you will have inventory sitting in your house that you cannot sell because they are now out of style.
This will never happen in dropshipping.
You can easily remove old products or models, and just change them with new ones.
7. Ability to Test Out Sample Products
While looking for suppliers, you can find some that offer free samples of their products for you to test.
Well, this is rare.
The normal thing that happens is you can order a product and pay for it. But unlike wholesale, you do not have to buy in bulk.
All you need to do is to order a product like as if you are a customer. Wait for it to arrive, and then decide if it is worth selling.
You need to do this. The last thing you want is to sell products that you have never seen.
So, should you buy all products you want to sell?
No, just buy one item from each supplier.
Then, make a decision if this supplier is worth doing business with.
Here are some things to consider:
- Processing time – the amount of time it takes the supplier to get the item from the warehouse
- Shipping time – the amount of time the item takes to get to you
- Quality of product – check if the quality of the product of the supplier is as described
- Quality of service – this includes the accuracy of the supplier; if you ordered a blue shirt, did he ship a read one?
You have to test your products and your suppliers. The last thing you want is to have customers complaining to you.
This way, you can experience the product and its features firsthand and decide whether it passes your standards or not.
This will also help you choose and sell only high-quality products on your store. You can use this to further help your customers in setting their expectations.
The great thing about the dropshipping model is you can order one product at a time.
You do not have to order wholesale.
Furthermore, the other benefit of having a sample is that you get the opportunity to take your own product photos. This can be used for testimonials, reviews, and marketing campaigns.
8. Dropshipping is a Scalable Business
One of the pros of a dropshipping business is that it is scalable.
What does this mean?
A scalable business means that you can grow it. You can repeat the process so easy and replicate your success.
While a brick-and-mortar store is also scalable, it is not easy.
Just think about building a restaurant, and then think about branching out. Can you imagine the nightmare of having to start another store?
The beauty of dropshipping is that it is easy to scale.
If you succeeded in selling women’s clothing, why not move to sell men’s clothing? If you succeeded in selling in the US, why not sell in the UK?
You see, it is completely up to you if you want to build another website or not.
One of the cons of a Shopify dropshipping store is that you have to pay for each store. If you have two stores, you need to pay $29 for each sort per month.
This is why I use SiteGround as a website and then build my e-commerce store with WordPress and WooCommerce.
With SiteGround, I can build as many websites as I want and pay only the price of one. It’s just that I still have to pay for a separate domain name for each store that I make.
RELATED READING: SiteGround Review: My Experience with SiteGround
9. Numerous Products to Choose From
Aah, there are millions of products to choose from in the dropshipping niche.
And why not?
You do not have to pay for inventory, so you can stuff as many products in your store as you want. I would caution against this, though. I prefer a niche store than a general store.
RELATED READING: Niche vs General e-Commerce Store: What Should You Choose?
What I love about dropshipping is that there are tens of thousands of suppliers to choose from. You can either go to AliExpress or look for local suppliers in your country.
Most dropshippers use AliExpress, but I don’t. There is nothing wrong with AliExpress dropshipping, especially if you do it with AliDropship. It’s just that I prefer to design my own products and not sell items that everyone is already selling in through Amazon dropshipping.
Apart from AliExpress, you can also use dropship directory tools like SaleHoo, Spocket and Oberlo.
Here are my reviews of some dropship supplier tools:
There is no limitation as to how big you want your dropshipping business is. Although it will definitely help to start small, it does not change the fact that there are endless options for products to sell.
10. No Minimum Orders to Purchase
In dropshipping, there is no need to buy in wholesale.
You buy in retail, but you pay at wholesale prices.
What does this mean? In dropshipping, you can buy one piece of clothing and yet pay only $8. If you are not doing dropshipping, you are likely to pay for the same kind of item for $25.
But since you are working directly with the supplier or manufacturer, you can buy one item at a time and yet pay a small amount.
And yes, there is no minimum amount of items to order. In wholesale, there is a thing called MOQ or minimum order requirement.
This does not exist in dropshipping. You can order one item from a supplier in China, and then have the supplier ship that item to your customer in the United States.
8 Cons of Dropshipping
1. No Control Over Suppliers
Your suppliers play a huge part in your dropshipping business.
Mistakes and problems are unavoidable in a partnership. There will be times that the orders can take too long to be processed, or the product’s quality is not as described.
The two most common problems in this regard are:
- Quality is poor
- Shipping takes a while
Here are the solutions that I recommend:
- Quality is poor – never work with a supplier who has a poor rating, no matter how cheap the item is. Also, do not sell a supplier’s unless you have ordered the item yourself.
- Shipping takes a while – set the customer’s expectations at the product page; it is better to have few customers who know exactly that their orders can take weeks than lots of customers who complain and ask for returns.
Never get too excited to sell items just because you see dollar signs. Make sure than if you sell, you forecast possible problems and their risks.
2. Low Profit
Having a low overhead cost is undoubtedly an advantage. However, you should take into account that the less money you put out, the less financial return you receive.
For example, you cannot expect to make a $10 profit for trinkets or items. Take a look at this cat toy from AliExpress:
As you can see, it is selling for $6.56 on AliExpress. This is your capital cost for the product. If you sell this if you do Amazon dropshipping, your competitor is selling it for $8.46.
Look at the Amazon dropshipping screenshot of the same product below.
Your gross profit is only $1.9.
If you sell 100 of this in a month, you have a gross profit of $190—not enough to make a living, eh?
This is why you need to be choosy about your products. You have to sell low-capital goods that you can sell for a high profit.
And how do you do that?
Products that have emotional value. You also need to find ways to increase your average order value.
RELATED READING: 8 Ways to Boost Profit Margin for e-Commerce Stores
Beginners usually have this problem. They have to make their store stand out by setting competitive and affordable prices. They do not realize that it is not good for business.
3. High Competition
I mentioned earlier that one of the pros of dropshipping is that it is easy to set-up, and the cost to put on up is really low.
What does this mean?
It means that if you can build a dropshipping store, others can, too!
For this reason, it is relatively simple to enter the dropshipping industry. And what happens is that it constantly increases the competition level.
So, how do you make your store stand out?
For one, you have to make your store look professional. I have seen so many dropshipping websites that look so bad—they are so awful, and the owners wonder why nobody is buying from them.
Beat your competition by building a brand. Make your store look professional—stand out from the crowd and make yourself shine.
RELATED READING: 5 Ways to Earn Customer Trust If You Have No Sale Yet
4. Prone to Legal Issues
Is dropshipping legal?
Dropshipping is a legal business model. However, it is prone to many legal issues, primarily because of many who start a dropshipping business do not know or do not care.
Some of the most common issues you need to worry about are:
- Tax Evasion
- Selling Illegal Products
- Selling counterfeit
Never violate the law. You do not need to be a lawyer to be able to comply with the law. Remember: ignorance is not an excuse.
Pay your taxes and never sell illegal goods. Also, never sell any item that is branded, unless if your supplier is a legitimate distributor.
5. Difficulty of Building Brand Identity
No matter how small your audience is, a disadvantage of dropshipping is that at the end of the day, if they are satisfied with their orders, they will love your brand.
But this is easier said than done.
A brand is not an easy thing to build. You need to be active on social media, and you need to standardize your products images. Entrepreneur has a great list to get you started how to build your brand.
You may want to look into the private label or white label dropshipping.
6. Difficulty to Provide Efficient Customer Service
Good customer service is one of the main factors that affect your customers’ perspective on your store.
Unfortunately, as a dropshipping business owner, you may find it hard to achieve this goal, especially so if you have no experience in the customer service industry.
You need a strong customer service orientation to deal with customer issues, especially if you have a bad supplier.
Here are some recommendations:
- Establish customer expectations with honesty; never lie just to make a sale
- Under promise and over deliver; if the shipping takes 2 weeks, say 4 weeks
- Study the fundamentals of customer service
- Be reachable; commit to 24-hour response time and stick to this commitment
Customer service is what makes or break a business. A good customer experience brings repeat customer and recommendations. A bad one is a sure way to make your business die a slow death.
7. Complex Order Processing
The process of order fulfilment in dropshipping does not just end with you forwarding the orders to your supplier.
You have to make time to explain to your customers that the total time it will take will depend largely on your supplier.
But here is the catch: you cannot tell the customer about your supplier, right?
And how, exactly, does it depend on the supplier?
Unlike some stores, you can come to a point where you are negotiating with two or more suppliers at once to be able to sell more products.
It isn’t certain that your suppliers are from the same country. As such, if a customer orders one product from each, there is a big possibility that the orders don’t arrive all at once.
See the problem here?
Customer orders two items from you, but these two items are sold by two different suppliers—so how will the package arrive at the same time?
Again, the solution to this problem is expectation setting. You need to the customer that her shipment will arrive in different packages, as they come from different warehouses.
Also, customers are not going to want to pay for one shipping for each product. You should be ready to offer discounted shipping if a customer has reached a certain amount.
8. Pricier Retail Costs vs. Bulks
The last downside that we are going to discuss is the difference between retail and wholesale order.
By retail, we are pertaining to dropship, mostly, because you are ordering one at a time, depending on how many customers purchase a specific product.
This can get pricier because retail orders are rarely subjected to discounts and sales offers.
Wholesale orders, on the other hand, refer to bulk orders. These are less expensive because most suppliers offer big price drops for a larger quantity of orders.
Even if you can buy dropship items on retail at wholesale prices, never ever forget that you can still save a ton of money if you ACTUALLY buy on wholesale.
Summary: Pros and Cons of Dropshipping Business
There go our list of the pros and cons of dropshipping.
This list should be able to help you carefully weigh your options. If you think dropshipping is too much for you to handle, you may study other ways to make money online, such as affiliate marketing.
Once you have explored your options, you can make an informed decision.
As far as I am concerned, dropshipping is worth it. My first dropshipping store made me learn a lot—from supplier selection to how to make a store look professional to complicated shipping—a lot!
If online retail is really close to your heart, then jump the gun now.
- Build your store with Shopify or
- Build your store with SiteGround, WordPress, and WooCommerce, as I did
Do not forget to use Elementor if you do self-hosting.
Best of luck!
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