There is no doubt that many people who have jumped on the dropshipping bandwagon have made a ton of money – but the question is, is it still worth it in 2020? Can you still make money dropshipping?
From our own experiences and after scouring the web, we have put together a number of pros and cons to help you decide whether dropshipping is right for you.
Before we dive in – be sure you understand what dropshipping is.
Pros of Dropshipping in 2019
Dropshipping set up costs are still low.
As explained in our previous article ‘start a dropshipping business in a day’ the set up costs are very low for an ecommerce business – this will allow you to set up quickly with limited risk, and also set up multiple shops for testing.
We recommend around £575 to start it up – which is very minimal compared to the majority of businesses as it also includes initial advertising spend.
Why is dropshipping so cheap to set up?
- You don’t have to purchase stock up front – only when a customer purchases
- There are no warehouse or fulfillment costs
- Set up of an online shop is cheap
- No need to employ anyone, you can do it on your own
There is very little risk!
Tieing into the above point of the low cost – there is hardly any risk associated with dropshipping.
The upfront costs of starting your own online shop and the lack of stock costs means that you can only lose the little money you have put in.
The great thing is that you can add 1 or 10,000 products to your store in the theme of your store and it won’t change your set up costs because you don’t have to store any of it! Just be careful as too much choice can lead to loss of conversions.
Not only that – but you don’t risk losing a lot of your time as it can be quick to set up! Time is your most valuable asset, so if you can trial
Constant testing and trialling
Due to the ease of setting up a dropshipping ecommerce store, you are able to create multiple stores and add multiple products to each of them.
This allows you to be able to trial products to see what works and provides the most profit. Within a normal ecommerce company, it costs a lot of time and money to change stock and suppliers!
Therefore, you will end up with a fully optimised product selection, bringing in a ton of profit.
And lastly… there is money to be made!
Dropshipping is a proven concept, that many of people including ourselves have made a lot of money from.
It is a great idea – especially when you are on a low budget.
However, it is not always plain sailing when it comes to starting your store and its sustainability is questionable – read on to find out the cons of dropshipping.
Cons of Dropshipping in 2019
Lack of control of fulfillment and shipping times.
Throughout the experience of dropshipping – this has been one of the biggest challenges.
In order to receive a profit on the items you dropship, you are likely to have to opt for the lowest shipping costs such as epacket, or China Post. The lead time on these vary hugely from 7 days all the way to 50 days, which can be a put off for customers.
You have to ensure you manage expectations of your customers, so that they are not disappointed with the long wait for the item. You would rather a reduced number of sales and fewer refunds, then lots of sales and a ton of refunds due to the delays.
The packaging is also not aesthetically pleasing, usually in the standard grey package with chinese writing on it – and generally people have bad connotations with this and assumptions of poor quality.
Low profit margins
The fact that you are buying and selling products individually, and therfore costs of the products will be significantly more then purchasing in bulk.
You will have to sell high volumes of stock and have little room for price changes and discounts.
This also creates a problem in advertisements, where you have to ensure your spend is watertight and you are hitting a very low cost per sale. Not all channels will be able to accommodate this, but if you can make it work then great!
Products could go out of stock
This proved to be a problem for us. The scenario was as follows:
- We stocked an item from Aliexpress
- We sold an item that is in stock
- By the time we purchase the item from Ali, it is suddenly out of stock
- We can not find the exact same product on Ali again.
- Customer is disappointed and we lose a sale
The only way to prevent this is to fulfill the sale as soon as possible or regularly do stock checks with the supplier.
This happened to us on a number of occasions, and depleted our profits significantly.
Supplier customer service is not always the best
The number of times we have messaged a supplier and received either an irrelevant, unhelpful or no response.
In their eyes, you are small fish. Purchasing one item at a time. They want big bulk sales, and that is where they will put their time in rather than answering queries from the dropshipping customers.
However, there are some good suppliers out there who will make time for you. We actually built some great relationships and they even sent us free stuff every now and then for us to try out and potentially stock. This is the kind of proactive supplier you should look for.
Hard to build a good reputation
One main issue for us was the lack of sustainability and control of building a good reputation.
Fulfillment is not down to you – therefore it is unlikely for customers to return with such unpredictable shipping times when they can buy the same products which will arrive in a few days unless your product is really unique (which is difficult considering you are selling someone else’s product).
Returning customers are vital for the success of a business – and will provide a valuable income down the line, so if you are not able to showcase a unique service or product, you will struggle to build a sustainable business.
Highly competitive in 2019
Dropshipping is at a peak, and it is a well known system to create quick incomes with little investment. This has created an incredibly competitive environment, with advertisements being shoved in peoples faces left, right and centre.
Due to the poor reputation of these stores, people are starting to relate long shipping times to poor customer service and quality.
However, if you are smart about things – there are always ways of standing out. Check out the video below from Oberlo if you are concerned about competition.
Conclusion – Should you start a dropshipping business in 2019?
Now.. for the whole point of the article. After weighing up all the pros and cons – should you do it? Should you use your valuable time and effort on a dropshipping store?
In my opinion, I wouldn’t recommend it. When I look to start a business, I am looking in the long term and I don’t see a sustainable business coming from a business which reputation is controlled by unreliable suppliers who have no commitment.
However, this doesn’t mean to say that there is no use for dropshipping. There are various ways you can use it starting out, such as:
- Testing demand for products before buying in bulk and with your own branding
- Getting started in ecommerce with a quick way to test your ability to sell products
In conclusion, it can be a great testing system but it is unlikely to be the million dollar company you are hoping for.
There are plenty of other low budget business ideas out there, so if you have decided that dropshipping is not for you or your weighing your options – take a look at one of our recent articles.
Or if you are looking how to start a business with a low budget – then check this one out too!