Does Dropshipping Work? The Risks You Have to Face When Start a Business
Dropshipping has been one of the most popular business models lately year, it made a significant impact on the eCommerce system.
What is Dropshipping
Dropshipping is a business model and a type of order fulfillment method which is ship the products directly from the manufacturer, another retailer or even a wholesaler to customers, the seller is regarded as an intermediary in this deal.
In other words, the store buys from a third-party store and ship directly to the customers. Therefore, the store owner never sees or handles the product. The merchant doesn't have a warehouse, doesn't keep products in stock and never have inventory.
When you heard the definition of dropshipping, some benefits below will pop into your head:
- Do not need much capital: you don't have to own a warehouse to store your products, don't need a brick-and-mortar store to show them. Cut down the rental cost reduce the operating cost very much. Dropshipping makes this simple and costs less, all you have to pay for is the cost of running your website (or even your social network)
- Lower Risk: when you never have to handle the inventory, you never lose money. You don't have pressure about selling your products. Many people consider it as an extra income.
- Convenience: because you don't have your own warehouse and office, so you can go anywhere but still can manage the orders. Free and no pressure.
But do you think about its disadvantages?
- It is a lower profit comparing to other fulfillment methods. Because dropshipping is the "easy to use" method, so the profit of it is low as its difficult.
- In the dropshipping model, you don't participate in the fulfillment process much, so it is a low level of control. If anything happening with your products or your supplier messes up an order, you and your business are responsible for this. And it may make you lost your reputation. You also can be taken liability.
- The level of competition is high. This section is easy to understand when this thing brings much profit for you, many people will sniff it and jump in that market.
- Product delivery can take several weeks, and Returns or refunds take too long. It takes a few weeks for the delivery, if customers don't like it and want to refund, it wastes a few more weeks, and can cause your cash flow problem.
So, is it profitable?
The answer is, "Yes."
The first thing is it doesn't take a lot of investment to set up a dropshipping store, and you don't need to hire much staff -> reduce the operating expenses. Its profit margin also low, but you have to notice the second thing: you don't have to participate in the manufacturing and the fulfillment process. So the only thing you have to focus on is how to sell your products more and more. It means you have more time to focus on the sale, attract customers, and improve your store and brand
But be careful
Many people are afraid to invest money in starting a business; all of us want all the profits without the risk. So, dropshipping seems like an excellent choice for establishing a business. But on the other hand, drop shippers are giving the customers' satisfaction to the third-party company with zero control. It means the third company holds your reputation in their hands.
All successful drop shipper test and research the plan-to-sell product in a serious way, they test hundreds of products before deciding to step in selling that niche product. Another thing is to find a niche that can be sold with low competition. Usually, drop shippers sell unbranded products with useful features, those products not accessible and cheaper than products with similar features.
However, anything has to have the effort to grow. If you intend to list items on your store and enjoy your bed until it has sales, your dropshipping business is going nowhere. To succeed in the dropshipping market, you must know all the traditional sale techniques, marketing. Some factors can affect the dropshipping:
- Supplier: the man who guarantees the quality of your products and directly affect customers.
- Niche: the wrong niche directly led to the failure of any store.
- Website: customers are unacceptable an awful website design with low loading page. Not to mention the SEO aspect, if your website can catch any traffic, but the dull and awkward site will make customers stay away from you.
Everything needs effort! The easier a business is, the more diligence and investment needed. Dropshipping has been one of the most popular business models lately year, nowadays it still profitable but not easy like the first years. Keep try and attempt.