A big chunk of questions we’re getting from our customers at SaleSource relate to starting a new dropshipping store and we can certainly see the appeal: Dropshipping became super popular in 2020, due to the fact that the costs of starting the business are minimal and you don’t have to worry about storing the inventory and product fulfilment.
All you have to do is to find a profitable product, sell it and pocket the profit. Sounds easy, right? Apart from the fact that it requires little upfront cost, the second major benefit, perhaps, is the fact that dropshipping is inherently scalable.
Whilst al of the above is obviously true, down the line there are a lot of nuances that you might want to be aware of. Unfortunately, it’s not quite as simple as it sounds and the mistake a lot of beginners make is getting into dropshipping thinking that it’s a get rich quick scheme.
Most people start the dropshipping business with the hopes that it will be easy money, but in reality there is a lot more to it that meets the eye and that’s what this article will unravel: A comprehensive view of the pros and cons that the dropshipping business model entails.
Pros Of AliExpress Dropshipping
Dropshipping is a business model that’s heavily reliant on suppliers, so if you are able to find quality dropship suppliers, then dropshipping can be an extremely lucrative and location independent business model. All that’s needed is a PC and internet and you’re all set.
This means that if you’re complete newbie in the world of ecommerce and only have a small starting budget, the bottom line is that you can use dropshipping as a stepping stone and with the newly acquired transferrable skills move up to the more demanding and more lucrative ecommerce ventures.
Apart from its convenience, dropshipping has a multitude of other benefits:
1.Start-up costs are practically non existent for aliexpress dropshipping
Assuming that you use an open source shopping cart platform, that’s completely free of charge, the bare minimum costs of starting an online dropshipping business includes:
- Webhost: between $1-$4 per month
- SSL Certificate: If you choose your webhost wisely, then it’s free
- Open source shopping cart: free
- Free credit card processor: 1-3% transaction fee
- Website Theme/Template: $15-$60 (Optional)
Total cost, between $1 and $64 – no upfront inventory cost, no overhead and no warehousing fees – it’s hard to imagine a business model that would require less skills and less upfront cost than dropshipping.
2.The set-up for shopify dropshipping is pretty simple
Back in the day when ecommerce wasn’t booming, there was little information on the internet on how to start an online store. In 2019 there are literally hundreds if not thousands of services that will set up an ecommerce store for you in a matter of hours. The type of service you get will obviously depend on your budget, but in most cases all you need is a Shopify subscription, which currently stands at $29 per month.
3.The risks are much lower compared with traditional brick and mortar stores
This is perhaps one of the most attractive characteristics of the dropshipping business model, the fact that since there is little to on upfront cost, you stand to lose very little if your business venture goes bust, apart from the time you put in to begin with.
Due to the fact that your business does not require inventory, and thus you don’t incur warehousing costs, there is no pressure to start making sales from day one.
The added benefit is that you can have a huge variety of items in your store and test which ones perform the best, without any additional cost – the upside to this strategy is clear. If you browse product research tools/dropship directories, such as SaleSource, you’ll be able to find dropship-friendly suppliers for most popular niches.
4. Shopify dropshipping gives you freedom to work from where you want
The nature of the business does not require you to have an office, have employees, a warehouse or to be located at a certain place. That’s why dropshipping become the #1 business of choice of the digital nomad movement, that became so popular in the last couple of years.
Without having to worry about all of the above, you can focus on what matters most – scaling your business. Indeed, dropshipping earned its right to be called the most scalable ecommerce business model due to the fact that sales grow at an exponentially higher rate than the overhead. You can run a successful dropshipping business with just a handful of people.
Cons of AliExpress Dropshipping
Its not all sunshine and rainbows, if you came into dropshipping with an idea that you can just spend $30 for a Shopify subscription and 10$-20$ for Facebook Ads and all of sudden you’ll get a ton of sales, you’ll be quickly disappointed, as dropshipping isn’t a magic way of printing money. Just like with everything else, once you do the research, you’ll realise that succeeding is much harder than you though in the beginning. But that’s to be expected, right? Everything that’s valuable isn’t easy and dropshipping is no exception.
Below is a list of things that you need to be aware of, before getting into dropshipping
1. You won’t be always getting the cheapest price from your suppliers
Oftentimes, depending on the size of the order that you place, suppliers will quote you a different price. It is a misconception to assume that the suppliers charge everyone the same: If you’re a much bigger customer it makes sense for them to offer discounts on bigger orders.
On the other hand if you’re a smaller retailer, it is much more of a hassle for the distributors to deal with you individually ship and pack your items, and therefore fees might end up being significantly higher.
This is where SaleSource comes in handy, with a list of most reliable suppliers that will offer you Factory Pricing, without the retail mark-up, ensuring that you get the best prices and stay ahead of the competition. It is generally advisable to use ecommerce tools, dropshipping tools and dropshipping software to expedite the process and focus on things that matter, such as product research and ad creatives.
2.The logistics of shopify dropshipping
The good thing about starting dropshipping in 2019 is that most suppliers (even small ones) offer free ePacket shipping, which makes your life much easier. However, that you can just sit and relax, as you still have to deal with your own customer base, in cases where there are shipping delays.
Some distributors tend to have different shipping times and different locations, if a customer orders items from a ton of different suppliers (via your website), he might get all of his packages delivered at different times. For that reason, it is important to keep the number of distributors to the minimum and buy everything from a handful of established and trustworthy suppliers, otherwise your dropshipping business will be affected by longer than usual shipping times and customer satisfaction will go down.
3. You’re competing with the retail giants such as Amazon and Ebay
A huge reason behind the rise in popularity of dropshipping is the fact that ecommerce has taken up such a large role in the business world and is quickly became the fastest growing sector. Any flourishing sector is bound to have a lot of competition.
Amazon, for instance has been so successful in recent years, that it led to the demise of a large number of offline retailers. In order to have a competitive edge, it is important to offer products that can’t be easily bought on Amazon or in your local store. Naturally, one has to be creative and employ extensive market research, with tools like SaleSource, that helps you find winning products at a click of a button.
This article offered an overview of the biggest pros and cons of the dropshipping business model as it stands in 2019. Whether the pros outweigh the cons is the choice that you’ll have to make before getting into it, but just like with anything else – if it sounds too good to be true it probably is. Dropshipping isn’t a gimmick nor is it a get rich quick scheme, it’s a business model that requires a lot of work and dedication, just like any business, the difference being is that it is perhaps the most promising one of 2019.