Pros And Cons Of Dropshipping: A Comprehensive Overview

This article will show you the pros and cons of dropshipping. In the end, you will have a clearer view of the challenges you will face.

In addition to presenting the challenges and cons, I will also show you some recommended solutions. This way, I can at least give you guidance on how to get out of tough situations.

We will discuss:

• The pros and cons of dropshipping
• Common dropshipping challenges
• How to automate your dropshipping store

How Does Dropshipping Work?

Dropshipping involves three parties—you, the supplier, and the customer. The way it works is simple, and below is an overview:

• You pick products and display them in your online store (you will not buy inventory)
• A customer orders and pays for the product in your online store
• You tell the supplier about the order and pay for it, along with the shipping fees
• The supplier ships the item straight to your customer

As you can see here, you are essentially a conduit or a middleman between a dropshipping supplier and a customer. The customer will never know that the product came from someone else—the customer would think that it is your product.

Is Dropshipping Worth It: Dropshipping Market Outlook In The Future

Dropshipping is worth it. Naysayers will tell you that the dropshipping model is dead and that it is too saturated. Nothing in this world is not saturated. Your success depends on how hard you work and how good you are at sales.

According to Statista, the eCommerce market will grow to $5,026 billion by 2028. That means trillions in US dollars. Now, many people who buy online do not even know that they are buying from dropshipping stores.

Many suppliers do not want the hassle of marketing their goods. They do not want to spend on customer acquisition costs. It is you, the dropshipper, therefore, who has the opportunity to sell these items to end-users.

1. Dropshipping Has A Low Cost To Start And Maintain

Dropshipping is not an expensive business venture, provided that you do not make the mistake of buying all the bells and whistles for your online store.

It only costs $1 for your first month to start an own dropshipping business. At this price, you get all you need to build a functional store, albeit you will have to work a bit harder than if you bought some other tools.

That $1 will go to your Shopify subscription, which is roughly equivalent to one coffee from a gas station. If you decide to start this way, you need to use a free importation tool from AliExpress to Shopify, and I recommend CJDropshipping for it.

If you are willing to shell out a little more, you need to prioritize spending on automation tools, and my recommendations are:

• Tradelle – free (more features start at $29.99 monthly)
• Spocket – $39.99 monthly
• AutoDS – $29.90 monthly

As far as maintenance goes, there is nothing to pay for except these tools. You do not even need an employee to manage your dropshipping store. As a start-up, you can also build the store yourself. You do not need to be a coder to build your dropshipping store—there are tons of videos you can watch on how to build one with Shopify.

2. Dropshipping Does Not Require Physical Inventory

One of the biggest attractions of the dropshipping business model is you do not need to stock on inventory. Let the manufacturer and suppliers do this—all you have to do is sell, sell, and sell.

In a traditional retail business, you must buy inventory and stock them in your room or warehouse. This process takes a lot of money, money that will sit in your room in the form of inventory.

And if you failed to sell them? You end up giving them away to charity.

Dropshipping does not work this way. The suppliers keep the inventory, and you only pay for a product—a single order—if a customer has already bought it from your store.

So, if a product costs $20 from the supplier, you do not need to buy ten of these. You buy nothing. Once a customer orders this from your store (let us say for $29.99), only then will you contact the supplier, pay them $20, and then they will ship the item to your customer. You keep the profit of $9.99 in this case.

The one thing you need to prepare for is bulk orders. Once a customer pays you, you do not get that money right away. It all depends on your payment processor. Some can take three days, and some can take at least two weeks.

Because of this, you need to front the purchase with your money. So, if there are five orders, you have to spend $100 today to pay your supplier. The payment of your customers will only get to your bank account after a few days.

3. Dropshipping Is Easy To Understand And Execute

Dropshipping is a ecommerce business model that is easy to understand, build, manage, and maintain. It is a far cry from traditional retail, where you take care of everything.

Here is how a traditional business works:

• You buy inventory, like shoes
• You need to make sure your inventory has enough sizes, colors, and shoe variants
• Each item has a different weight
• You need to figure out the shipping cost for each product type
• You have cost of goods sold, account receivables, etc.

Too many things to do, right? Dropshipping eliminates all these. The way it works is like this:

• Choose a product; determine the cost
• Post it to your store (price it accordingly)
• The customer pays you for product and shipping
• You order from your supplier; the supplier ships the item

See the difference? With dropshipping, you do not even need to worry about who the shipping carrier is, what box to put the item in, or who does what. All it takes to succeed is to market, market, and market your products.

In addition, you can add as many products as possible to your store and even create all sorts of discounts, coupon codes, bundles, and so much more!

4. Dropshipping Business Operations Can Be Automated

Many aspects of dropshipping can be automated, leading to efficient business management. In a traditional business, you must be involved in every process or step of the way.

Here is how a typical traditional business works:

• You take a photo of the product
• You write a product description
• You upload the product to your store
• You pick, pack, and ship the product if there is an order

This process is tedious and too manual. With dropshipping, here is how it goes:

• You integrate a tool like Tradelle, pick items you want to sell, and import (transfer) them all to your store with a button click
• You set your pricing strategy in your store (add a fixed dollar amount to each product or a percentage)
• Customer orders from you, and the supplier (Tradelle) gets notified automatically
• The supplier ships the item to your customer

As you can see, once your products are up and running, your store will operate on its own. If a customer orders while you are asleep, there is no need for you to wake up and order the item yourself. There are automated systems that will do this for you.

One of the best tools you can use is Tradelle, a tool that offers dropshipping products, product importation, analysis, and automated order fulfillment.

5. Dropshipping Can Be Managed Anywhere

Another thing that makes dropshipping an awesome business is that you can manage it from anywhere, and I mean this literally.

In a traditional brick-and-mortar store, you must be physically present to process orders. In a typical e-commerce store, you must be with your inventory, physically, to pick, pack, and ship orders.

None of these happens in a dropshipping store. You can be in the Bahamas today, sipping your Pina Colada, and you can still manage your dropshipping store on your phone or laptop.

How? If you use an automated ordering tool like Tradelle, you do not even have to do anything. If not, then all it takes is a few taps to order products from your suppliers, and then they will ship the products to your customers.

For as long as you can go online, you can view your dropshipping sales, and stats, process orders, remove products, add products, create ads, launch marketing campaigns, send emails—you can do everything.

If you use automation tools, you manage your dropshipping store less and less. For example, you do not even have to update your prices if your suppliers updated theirs—your automation tool will do this for you, thus preventing financial losses.

6. Dropshipping Allows Flexibility In Product Range

Dropshipping allows for easy adaptation to market trends and customer preferences. In a typical physical store, you have to buy inventory. Once you are out of cash, and a new popular product hits the market, you can no longer stock up on it unless you borrow money.

With dropshipping, you can post as many products in your store as you like (though I suggest coherence in this). If you dropship toys, and a new water gun becomes popular, you can add that product right away. You do not need to buy inventory—at the very least, buy one to test it.

If you see a product that is no longer popular, you can easily remove that from your store, and you lose nothing. In a traditional business, you must dispose of that inventory, even at a loss.

Dropshipping does not impose any kind of limitation for expansion. If you dropship clothing, you can always branch out and add shoes or accessories. All it takes to succeed is to find the right product and the right supplier.

Because of this, you can easily adjust to the ebb and flow of the market. If there is a demand for a product, you can easily keep up without worrying about money for that inventory.

7. Dropshipping Reduces The Risk Of Product Experimentation

With dropshipping, businesses can test new products from multiple suppliers without significant upfront investment. In a traditional business, things can go wrong. For example, if the manufacturer fails to meet your product specifications, you will find yourself in serious trouble.

Another thing you do in a typical physical store is that you buy inventory, thinking this is going to be hot, only to realize that nobody is interested in it. It is also possible that you are late to the party—if you sold fidget spinners once the craze is over, you are left with that inventory.

Dropshipping does not put you at this type of risk. You can post a product in your store and wait for the market to respond. If the market does not properly respond, you only lose money from your advertising cost, if any.

From here, you can move to another experiment. You can always mix and match products, do product bundles, and do all sorts of things to see which one works the best. At worst, you only waste time and ad money, but you will never waste money in experimenting on actual, physical goods.

Disadvantages Of The Dropshipping Business Model: Cons Of Dropshipping

1. Dropshipping Is Extremely Competitive

The barrier to entry to dropshipping is extremely low. If you can afford $1 to start a dropshipping store, so can millions of people. The result?

Competition. Extreme competition.

If you can find products to sell from AliExpress, so can other people and dropshipping companies. Do you see where we are going here? You will be competing against thousands of people, and it can be stressful. So, what can you do?

Here are some recommendations:

• Be the best in marketing – give people a reason to buy from you and not your competitors
• Sell unique products – sell items that people will never find from other sellers. You can do this either by private label or print-on-demand.

If you dropship items that everybody is already selling, chances are you will undercut your prices just to be able to compete. This process is dangerous, as you will keep losing money with no guarantee that customers will buy once you increase your prices.

2. Dropshipping Does Not Give You Full Control

You will not have control over the speed of shipping in dropshipping, nor will you have control over the price and quality of the items you sell. Some of your suppliers will make mistakes, and you will be the one accountable for these mistakes.

Here are some recommended solutions:

• Always test a product; order one piece to see it in person
• Work with legitimate suppliers only
• Only work with suppliers who offer refunds for their errors

If you use legit dropshipping suppliers like Tradelle, you will not have these issues. You can enjoy protection as a buyer of these suppliers.

As far as testing products go, you do not need to buy all the products that you list in your store. What you want to do, at the very least, is determine if your supplier is trustworthy. You can order one or two items from the same supplier, and then make a judgment as to whether they are credible enough to work with or not.

From this experience, you can tell if this supplier can deliver goods that meet your standards. By ordering products, you can also measure how long it takes them to process an order and drop the item to their shipping carriers.

3. Dropshipping Makes It Difficult To Create A Brand

If you go to Amazon, you will see many dropshippers that sell the same products that they source from China. Although they change the brand name and labels, these products are the same thing.

As a dropshipper, you may fall into this trap—you will white-label your products, only to become one of the hundreds of generic sellers of the same item.

It is difficult to create a unique brand as a dropshipper. Changing the labels and packaging is not enough. you need to have a solid and dependable marketing and branding strategy.

To do this, you need to have a plan. This plan includes a marketing style, or a brand ideal—is your rand for parents? Is it for Daddies? Mommies? Sporty types of teens?

Your brand is what will set you apart as a dropshipper, and you can only do this by giving your company a personality. From your logo to your labels to your ads—all of these must be coherent to convey the same message.

It will take time and some trial and error to get this done right. Do not be afraid to experiment. Even large companies go through re-branding to appeal to the current generation, so there is nothing wrong with doing the same.

4. Dropshipping Requires Funds For Fronting Purchases

Although dropshipping is free, you need to pay for your orders once they come in. In an automated dropshipping system, you need to integrate a credit card or deposit a balance to pay for the orders automatically.

If you only have a few orders, then this should not be a problem. The problem begins once you scale up. What if you are now receiving 50 orders per day, and each order costs $20 from your supplier? It means you need to spend $1,000 daily to get the business going.

If you run out of money to pay for orders, your dropshipping business will stop. Here are some things you can do to prevent this:

• Have a separate bank account and credit card only for your business
• Scale slowly so that you can increase your financial buffer
• Be on top of your business operations; know your sales, trends, expenses, etc.

In essence, you must always do the math, know your financials, and separate your business financials from personal ones. Pay your taxes so you can prove to the bank that you deserve a higher credit limit. Be in control—stop a promotion or ad if you know you cannot financially sustain your orders, as delayed shipment will make your customers unhappy.

5. Dropshipping Requires Several Entrepreneurial Skills

Dropshipping is easy to set up, but like any business, it does not work like magic. Dropshipping is not a get-rich-quick scheme. It takes a lot of work to make it successful. And like any business, you need some serious entrepreneurial skills to see positive results.

Here are some examples of the skills you need:

• Problem-solving skills
• Financial skills; math skills, logical skills
• Analytical skills
• Management skills; forecasting skills
• Marketing skills

Do not be scared if you do not possess these skills now. Just know that this is where you are going and that you will need to develop these skills yourself.

If you have the budget, you can always hire someone to do something for you. For example, you can hire someone to build your WooCommerce or Shopify store. You can also hire someone to create your marketing ads or videos. You can also hire photographers to create exclusive product images for you.

If possible, what I recommend you do is learn these things yourself. The internet has no shortage of information, videos, and instructional materials about all facets of dropshipping that you can consume.  You do not need to be an expert, but you must at least have a solid foundation of these skills.

Automate Your Dropshipping Business for Increased Sales

Automation is one of the keys to success in dropshipping. Instead of doing manual work, you let a computer system do all this.

The best tool you can use right now, which is free to try, is Tradelle. It is a supplier, product research, and import tool that comes with analytics and a ton of features.

With Tradelle, you can do the following:

• Automate fulfillment of orders
• Look for reliable alternative suppliers
• View advanced analytics of product data
• Access premium products that have low competition
• Overview of current trending products

Without this tool, can you just imagine the amount of work you need to put in? You will be wasting time and money doing manual labor for your store—labor that a machine can do even if you are asleep. We suggest that you head on to Tradelle now and sign up for a free account so you can test it.

Is Dropshipping The Right Business For Me: Tips For Deciding

How do you know if dropshipping is the right business for you? Below are a few indicators.

• You are a hard worker – dropshipping requires a ton of work. You need to research products, plan your marketing, launch your ads, analyze data, and so much more. Dropshipping is not a passive business, so it is not for you if you are looking for a passive income.
• You are not afraid to learn and make mistakes – as an entrepreneur, you will make mistakes along the way, like picking the wrong products, advertising the wrong way, designing an amateur website, etc. You must have the capacity to learn and the willingness to admit your mistakes if you want to succeed in dropshipping.
• Your business capital is small – finally, dropshipping is for you if you want to go into retail but you have little to no capital.

Dropshipping is for people who want to get into the retail business. It is not any different from any physical or eCommerce store that sells items, albeit you will not buy inventory upfront.

Before you dropship, you must ask yourself if you want to deal with customers and suppliers—in essence, dropshipping is a people business. So, if you are not a people-oriented individual, this may not work for you.

Dropshipping Challenges You Will Face

Dropshipping is not a walk in the park. You will face several challenges along the way, and this section will give you a quick summary of these challenges.

• No Sales – one of the biggest challenges in dropshipping is the absence of sales. In this situation, you need to revisit your product selection and your marketing strategies. Most of the time, you do not get sales because you’re selling a product that nobody wants or because you are not convincing buyers enough.
• Bad Suppliers – from time to time, you may come across dropshipping suppliers who are late in shipping or those who send the wrong item to your customers. Always test your supplier’s dependability before committing. If a supplier frequently makes mistakes, ditch that supplier and work with someone else.
• Low-profit margins – do not sell products that everyone is selling. It will only force you to sell at the same market rates. Choose unique products that you can personalize or products that have few competitors.

Dropshipping is a busy business—you are in an active market, and this same market will change and evolve. As a dropshipper, be prepared to face challenges along the way. These challenges will continue to exist, so you must have the grit to see it through.

FAQ: Pros And Cons Of Dropshipping

What’s the downside of dropshipping?

The downside of dropshipping is you are competing against many dropshippers. You need to find a way to make your store and offerings special enough to beat your competitors.

Is it worth doing dropshipping?

Yes, it is worth it. If you succeed, you may find yourself in a position where orders come in like clockwork.

Is dropshipping usually successful?

No. Like any business, many dropshipping businesses fail. It is not enough that you watch one YouTube video and get started. Dropshipping is a real business that requires a lot of planning and trial and error.

Final Thoughts

The next step I recommend is to create a free account with Tradelle. Use this tool to see how you can find winning products and dependable suppliers. In addition, you can use this tool to automate your dropshipping processes. The less manual work you do, the more time you can spend on marketing and managing your dropshipping business.