Dropshipping has been around for many years now. Year after year you will hear the whispers that dropshipping is dead.
This got me thinking about what the future holds for dropshipping, so I’ve done a bit of research to find out.
Dropshipping does have a bright future. It has steadily increased in popularity over the past 10 years and shows great promise for the future if that trend continues. This is mainly because of the rise in e-commerce, the increasing knowledge and the acceptance of dropshipping as a business model.
Below I will expand on various aspects of dropshipping and whether it is still worth your time and money. There are also ways that you can increase your chance of success, which you might be interested in reading.
Dropshipping has a Promising Future
Dropshipping is an e-commerce business model built around order fulfilment. It involves marketing one or multiple products and taking orders for them. The orders are immediately directed to a third-party wholesaler, who ships that product directly to the customer.
People make money from this by sourcing discounted products and selling them for a higher price, therefore making a profit without ever handling the product.
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Dropshipping has been increasingly successful over the past decade. Those who say that this business model is dead are generally looking at the many failed attempts over the years.
What they don’t take into account is the effort that goes into successful companies.
Those who fail are usually those who want to make money quickly with very little effort. They’ve jumped on the ‘get rich quick’ bandwagon and think they can just set up their website and walk away.
That’s definitely not how to be successful at dropshipping. This mindset is what makes many dropshipping businesses fail within the first three months. I’ll explain a bit more about what makes this method successful further down.
Time has shown that over the past 10 years, there has been a steady 7% increase in profits each and every year from this line of business. It is now looking at over $4billion in profits.
This is definitely due to increases in e-commerce popularity and a greater understanding of the business model which allows it to become more refined and effective.
The popularity of internet marketing does not seem to be decreasing anytime soon, meaning that dropshipping is going to be an effective business model for years to come.
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How Dropshipping Can Benefit You
Dropshipping can benefit you, whether you’re using it for all of your sales, or incorporating it into a small percentage of an already established business.
1. No Storage Space Necessary
The biggest benefit is that you don’t have to store the products you are selling. Storing products costs money because you need space, especially if the products are particularly bulky.
This is one of the reasons why some established businesses will choose to sell their bigger products using the dropshipping method. They may also choose to do this for heavy, fragile, valuable (high-risk) and perishable products.
2. Ability to Test a Variety of Products
Another reason to incorporate this method into your business is the ability to try out different products.
Sometimes, a vendor may not know whether a product will be popular and don’t want to invest in a bulk-order until they are more confident. By dropshipping, they will be able to sell the product with minimal risk and minimise losses if it is not popular.
3. Prices and Profits are determined by You
If dropshipping is your choice of making a passive income, it gives you much more control than other passive income methods. For example, profits from affiliate marketing will be restricted by the product company. They stipulate how much of the sale you get to keep, and this percentage may be lowered at any time.
In dropshipping, you have the freedom to market the product at whatever price you want. Obviously if it’s significantly more than buying from the wholesaler, you will not make any sales. But the point is that you’re in control of how much you can make on top of the price you are paying for it.
Other benefits include working from home and the potential to make large amounts of money, provided you are an effective vendor.
Related Article – 6 Best Dropshipping Suppliers with Fast Shipping (Location-Based)
Are There any Disadvantages to Dropshipping?
Unfortunately, there are also disadvantages to dropshipping that may make it hard to make enough money to make it worth pursuing.
1. Customer Support, Refunds, Returns, etc
One big disadvantage is the lack of customer support from suppliers. It’s up to you to deal with customer complaints, refunds and general support. This can be time-consuming and if you’re not making a large enough profit, it may not be worth your time.
Sometimes suppliers will also provide poor service, including long shipping times and suboptimal products. This can be frustrating because it is out of your control and you won’t know until you try each supplier first.
On a similar note, some suppliers may be operating illegally without your knowledge. Unless you have an ironclad dropshipping agreement contract, you might be caught up in their illegal activity, and pay the price further down the track.
2. Finding a Winning Product is Hard
You also have to choose your product wisely. A lot of products can be found on sites such as eBay and Amazon for a cheaper price and be delivered a lot quicker. Therefore it’s mostly beneficial for niche products that people don’t mind waiting for.
Finally, branding is very difficult for dropshipping companies. When people buy products, they are usually focussing on the product brand, not where they got it from. Therefore it is common to have one-time-only customers.
Related Article – What Is The Average Profit Margin For a Dropshipping Business?
Is Dropshipping Worth it?
With these many disadvantages, you’d think that dropshipping is not worth your time and money.
So why has it become so popular?
Because, if done correctly, you can minimise the disadvantages and maximise all the benefits I mentioned earlier.
More people are buying online than ever before and suppliers are becoming aware of dropshipping.
It even benefits them because you are marketing their products for them. There are not many people who would say no to free exposure and more sales.
The upfront costs are also very minimal considering you’re not purchasing the stock before the sales are made.
Costs include maintaining your online store, which is around $29 each month, as well as paying for your domain name, which can range from around $5-$20 per year. The marketing of your products is entirely up to you and therefore the costs will vary.
So if you’re able to build an effective dropshipping business and you succeed, then the time and money you invest in that business is well worth it. Next I’ll talk about things that can help you succeed and get the most out of dropshipping.
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How to Be Successful at Dropshipping?
The number one priority for your dropshipping business should be treating customers with respect.
This means listening to their complaints and doing everything in your power to help them. Sometimes you may not be able to help them, in which case you should be quick to apologise and offer a full refund.
Many dropshipping companies have failed, but those that succeed all seem to say the same thing about customer satisfaction. It needs to be exceptional in order to compete with other retailers online.
I mentioned earlier that some of the issues lie with the supplier and are out of your control.
This is true to a point but can be prevented by choosing your suppliers wisely.
Take the time to build a relationship with them and determine if they provide quality products and quick shipping. For this reason, you may choose to test suppliers before you commit to them.
You will also need to stay up-to-date with your market research. There’s no point in selling a product that is not going to sell.
Some people have a knack for choosing ‘the next best thing’, but if you just pay attention to what is popular among the general population, you should do well.
That brings us to your specific product. As I mentioned earlier, it should be something that is somewhat special.
If you’re selling pencil cases and they take a month to deliver to the customer, people are going to just drive to the local shops to get one instead.
But if you’re selling something that they’ve been thinking of buying for a while or struggling to find elsewhere, they’ll probably be more inclined to wait a few weeks on delivery.
You might also want to consider building up traffic to your website first. This can be done through marketing or through a blog.
Finally, you need to know that dropshipping is not a walk in the park. It’s not a set-and-forget method of earning money.
Some people think they can set up their website and it will just make money for them. But without that customer service, building relationships with suppliers and market research, your business is likely to fail.
Overall, if you’re willing to put in the effort, dropshipping is still a promising business model for the future that you should consider.
Best of luck if you are finally going to start one.