Is Dropshipping worth it?

This article gives answers to all your questions about the dropshipping business model.

Statistics about the dropshipping business model:

• The dropshipping business market value is expected to reach $557.9 billion before 2025, registering a CAGR of 28.8%.
• There are 2.05 billion global digital buyers in 2020 and are expected to climb up to 2.14 billion in 2021. (Oberlo)
• In 2020, the revenue generated by the retail sales is $26.074 trillion worldwide in that 16.1% of sales are from eCommerce platforms. (Oberlo)
• In 2017 Alone, 23% of All Online Sales Globally Were Accomplished By The Dropshipping Model, Which is Equal To Approximately $85 Billion Per Year.
• 27% of retailers have adopted dropshipping business. (Ecommerce-platform)
• Dropshippers Can Earn More Than 50% Profit Than Those Who Keep Their Own Stock Inventory

What is Dropshipping?

Dropshipping is a retail business model in which retailers don’t need to have a sell-in stock. Instead, when a store makes a sale the product is purchased from a third party and shipped to the buyer directly.

Sellers don’t need to have a physical storefront or warehouse, no hassle of inventory management, and product handling.

Advantages of Dropshipping Business:

Dropshipping businesses have been aspiring entrepreneurs globally because it’s easy to run a business with no physical storefront and stock. You can rapidly change the business ideas with no downside. You can test different products that are in demand. Here are some more advantages of the dropshipping model.

No Big Investment is Required

One of the greatest advantages of the dropshipping business model is that you don’t need to invest thousands of dollars on inventory up-front. When you start an online reselling business most of the capital is exhausted in stocking inventory, warehouse, and staffing.

So, this retail business model is easy to start your business venture with no time and less investment.

Easy to Get Started

Dropshipping one of the easiest businesses to start. You don’t need any prior experience. You can learn the basics from the online sources available to get started today.

It gets easier to set up an online store because of eCommerce CMSs such as Shopify, WooCommerce, and Oberlo, or you can hire an eCommerce website development company to build your store online.

No Issue of Inventory Management

You don’t need to bother about stock management, wait for product delivery, and warehouse management costs like traditional retailers.

Dropshippers, get rid of hiring staff to unload the goods, put them on the shelves, and manage inventory on the system.

Flexible Location

You can manage your store from anywhere only needing an internet connection. So, the constraint of having a presence in a particular location does not trouble you as long as you can communicate with the buyer.

Wider Range of Products

Since you don’t need to invest in building your inventory, you can select the latest trending products and list them up on the website. You can update inventory anytime with the most demanding products.

Easy to Test

When you launch new products that don’t have a past performance record, the risk of failure can obstruct you from moving forward. Maybe consumers don’t like the product that drives you to lose money and time.

Dropshipping business models proffers you the freedom to test new products with the least risk.

Disadvantages of Dropshipping:

Like all other businesses dropshipping has some disadvantages too. Before you invest all your savings in dropshipping business. Let’s have a look at the disadvantages of dropshipping.

Profit margin can be considerably low –

A major disadvantage. Because you have to sell products at lower prices than your competitor. So, to increase the profit amount you have to increase the number of sales.

For that, you need high traffic on your website that costs you to spend much on advertisements, promotions, paid campaigns, and social media marketing.

According to FitSmallBusinesses, you can calculate the profit using the following variables

• 20% Margin (on core products)

• 2% conversion rate

A rough formula for profit in the initial stage

(Traffic x .02) x (average order x .20) = estimated profit

So the thing you should consider is the traffic on your website. If you are skilled enough to bring customers to your website, go for it.

No control on quality –

Since your products ship directly to the customers you can’t inspect the quality of the products. You won’t get to see if the manufacturer packed damaged products, swap products, or lower the quality you listed on your website.

No control over the shipping –

In dropshipping, Manufacture is the in-charge of packaging, shipping, and quality. You can’t control the supply chain process. So, if customers complain about the product quality, fulfillment policy, or return policy you’re not able to command it.

You depend on the supplier but still, you have to communicate with your buyers.

Less control over branding –

Dropshippers have fewer opportunities to build their brand. You can do branding through your websites and by personalizing high-quality photoshoots of the products.

In dropshipping, often the supplier or manufacturer designed and brand the products and packaging.

Summary –

As we discussed the all the major points that you should need to know about the dropshipping business model one by one is:

• Statistics about the dropshipping
• What is the dropshipping business model?
• Advantages of dropshipping
• Disadvantages of dropshipping business
• How to calculate profit margin initially

Endnote –

Now, you’ll get the answer: Is the dropshipping business worth it in 2021?

You always need to work hard to be a successful online drop shipper. Dropshipping is not the easiest business to start online. But all your hard work paid off in the end.

If you have experience in online marketing and knowledge of business research can help you to win this battle.

So, before starting a dropshipping retail business, keep in mind all the points discussed above, and go for it.

All the best!!!

Suggested read: Why Your Business Needs An e-Commerce Website?