Many people doubt the power of dropshipping. To most, it is an idea whose time has come. To many others, however, it is a business that is literally on its deathbed. It is, therefore, necessary to examine either claims to know just where the truth is.
Our discussions here revolve around just that. We aim to showcase the viability of this business model in this day and age. Our team of experienced researchers has delved into finding out the many benefits that await you in this business. Find out more about them below…
Is the dropshipping store still need to build in 2019?
To be able to arrive at the best conclusion, we have to examine both the benefits and downsides of this business model. The first part endeavors to look into the potential benefits you stand to accrue, while the second part focuses on the possible downsides of the business model.
PART A: PROs of dropshipping stores
Brings in Passive Incomes
Unlike most other business models, this one does not require that you play an active role in propagating it. On the contrary, it lets you earn some income passively and right at the comfort of your own home. This stems mainly from the fact that you do not have to fulfill the products.
Instead, you only act as a link between the would-be client and the manufacturer. This not only reduces stress but also takes the risks of withholding products away from you. You are hence capable of focusing only on your core business of marketing and marketing alone.
Reduced Risks of Doing Business
As has already been hinted above, this business model is less risky than competing ones. Several factors are responsible for this. For one, you are not the one fulfilling the products. This means you do not have to suffer the consequences of delays in delivery or pilferage of the ordered products.
Secondly, even if the products are returned, your reputation will not really be hurt. Instead, the blame will be apportioned exclusively to the supplier or manufacturer of that commodity. This means your future orders even from the affected persons will not really be adversely compromised.
Low Upfront Costs
All businesses definitely need some startup capital. This amount varies greatly from one business to another. The good news is that capital for these dropshipping stores is considerably low. In most instances, all you will have to pay for are the website and the licensure, nothing else beyond that.
Moreover, you really do not have to rent a physical store. You may only set aside a portion of your private residence to act like your head office. This also spares you the inconveniences others have to contend with in their attempt to reach out to a targeted audience.
Zero Inventory Costs
Other than low startup costs, this form of business also requires no stocking of inventories by you. This is because you don’t have to keep any inventory in the first place. Instead, the suppliers and wholesalers whom you work hand-in-hand with are the ones to do that.
Zero inventory costs also mean that you spend less to sustain the business on the whole. It spares you the agony others have to go through to maintain the proper running of their businesses. Also, you do not have to put up or lease a warehouse to safeguard your stock as is the case with traditional models.
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No Value Addition or Product Development
Given that you are not the one who actually stocks the products, you are not required to add any value or develop the products. All these are done by the respective manufacturers or wholesalers of these commodities. You only have to choose the products which your customers already like and promote them.
Apart from letting you concentrate wholly on marketing the products you are interested in, this benefit goes the extra mile. It only lets you choose those commodities or a range of commodities which your audience already has an interest in. Reduces your chances of having to stock or deal with irrelevant products.
Higher Profit Margins
Profit is generally defined as the difference between the sales revenues and the costs of the goods sold. Compared to other business models, dropshipping brings about higher profit margins. This is mainly because of its lower overhead expenses and the means that spend less to stay afloat.
If you opt for it, you will spend less of your time and money and still generate greater sales in return. Moreover, it also yields some unquantifiable benefits which go a long way in making it a good venture. Ordinary business approaches, unfortunately, lack these extra non-monetary benefits.
Wide Variety of Niches
Niches are to dropshipping what products are to a retailer. There are no shortages of niches in this business model. Examples of these niches are wireless devices, mobile bars, sportswear, wearables, baby care, video & photography lights, wall stickers, smartwatch accessories, pet products, grooming, and personal care, among others.
With this diversity, you can never lack anything to sell at any given time. Additionally, you get to spread the risks further by handling many niches. This is not to mention the stabilized revenue inflow that comes with selling multiple products at any given time.
You can also try a method called “Drop Surfing” It’s a method that’s based on selling products that are trending and you keep riding the wave. I came across this article that explains how it works.
Great Savings
The dropshipping business model, by its sheer scope and makeup, is exempted from many of the charges which other ordinary business models are subjected to. These include transportation costs, maintenance fees, employee charges, and freight charges, to mention but a few! Given that you do not incur these costs, you save a lot of money.
Apart from increasing your profit margin, the absence of these costs also confer to you other added benefits. They give you some peace of mind in the sense that you do not have to worry about them at all. This, in return, makes the entire venture more fruitful.
Wider Product Offering
With this technique, it is possible for you to offer a wider range of products. You may deal in sportswear, electronics, and textiles for instance, at the same time. The benefits of a wide product offering are too many to be downplayed. Its most significant of course is the higher profit margins.
Other than that, this offering means you will receive income all year round because different products have their peak seasons. And handling many products at a time means that there will always be someone asking for a product. Those ‘dry moments’ are hence heavily suppressed.
Extra Free Time
The ordinary retail business entails the use of a lot of time. You have to manage your employees, receive stock, store and monitor the stock, and remit charges and taxes. The case is however different with this business model. That is because it is devoid of many of these standard practices.
Given that you handle fewer activities, you have plenty of free time at your disposal. This extra free time lets you focus solely on matters like sales and marketing. They also let you rest and recuperate freely as opposed to other forms of businesses.
It is Futuristic
Dropshipping is largely in its infancy. And since much of the world is currently embracing the concept of e-Commerce, many more people are buying online than ever before. The combined impacts of these factors are that dropshipping is the business model of the future.
Even if you have no passion for matters sales, this is a business model you want to embrace at all costs, because doing so now will put you at a strategic advantage later on. You will be able to stabilize and create a name for yourself before others set in.
Safer and Faster Online Payments
The bulk of goods ordered via the dropshipping business model is settled via online payment platforms. Compared to other forms of payment, online payments are faster, safer, and more secure. Moreover, many people, especially in the developing world, are increasingly embracing it, so this further makes the business a nice thing to try.
Chances of getting conned or losing your money via this platform are hence severely reduced. This means you stand to enjoy greater revenues and limited complaints as a whole. Also, those numerous complaints revolving payment disputes are heavily suppressed. Who hates safety and reliability while dealing in merchandise? Certainly not you!
It Supplements Online Marketing Campaigns
Given that it takes place almost entirely via the internet platform, dropshipping has the potential to supplement other online marketing campaigns. By embracing this form of business, you get to ‘hit two birds with the same stone.’ You sell merchandise and also contribute to their promotion, all at a go!
Compare this to the ordinary sales and marketing approach where these two are separate. You incur higher expenses which thin your profit margins. These two processes are also redundant in that they are for a large part duplicate. For your simplicity, building a dropshipping store is definitely the way to go.
Excellent Political Goodwill
As has already been noted above, this business concept is increasingly getting embraced, and many wholesalers and merchants are in fact making room for it. They are also willing to work with anyone who wants to use this model as an avenue to make money and reach out to clients.
You definitely want to cash in on this fact. By building your dropshipping store early enough, you will be able to form some synergy with these merchants. You will also develop this synergy in such a way that it enables you to enjoy increased sales. So, why not take advantage of this goodwill?
Shared risks
All businesses must confront and contend with some risks in the course of operations. The beautiful thing with this drop-shipping business model is that the risks are shared. That is because of the many players that perform distinct roles in the running of the business. These are the manufacturer/wholesaler, the delivery firm, and, of course, you.
Each player in this ecosystem only has to contend with some limited risks, so when things go south, you do not have to bear all the associated costs unlike in a normal business model. This should also give you more confidence to launch into and take on the sales of merchandise with vigor.
Wider Geographical Spread/Impacts
Unlike your ordinary business model whose sphere of influence is limited to your locality, this one grants you access to a wider geographical locale. The internet technology literally makes your business accessible to a global audience with almost no serious investment on your part.
This indirectly leads to higher sales revenue given that those who live afar off may order your goods and have them delivered to them right at their doorstep. Unlike many other businesses which take ages to expand and impact a larger area, this one takes only a little while to do so.
Round-the-clock Availability
Closely related to the above is the fact that this business model affords round-the-clock availability. The internet ‘never sleeps.’ It is indeed possible for anyone to order any merchandise at any time of the day he deems convenient. This contrasts sharply with the ordinary stores which must be accessed during the day alone.
Tons of endless opportunities come along with this arrangement. Many people prefer an arrangement which lets them access services at times that are convenient for them. Other than that, you will receive comparatively more orders than those who operate only during the day. This definitely means higher profits or you.
B. CONs of Dropshipping Business
Realistically, we now have to examine a couple of its most serious downsides. These are issues which you will most likely face or have to contend with in order to stay afloat. An in-depth examination of these issues is a sure way of getting to make the most informed conclusion.
Severe Competition
Due to the low upfront costs involved, many people are entering this business, so, chances are you are not the only one who has contemplated starting your own. And If and when you officially enter the business, you will have to fight it out with many other qualified and like-minded sellers.
The problems with this issue are that your profits will definitely not be as high as you might expect, and you will still have to implement other sales and marketing approaches to gain that leverage or competitive edge over the other players.
Limited Control over the Supply Chain
In this business model, you do not stock any goods. It is the suppliers, manufacturers, and wholesalers you pair with who do this job. Courtesy of this arrangement, you lose some control over the entire supply chain. Many problems ordinarily come along with this unfortunate arrangement.
You might end up suffering some consequence when the client finds the product unsuitable for his liking or needs. He might end up blaming you for a fault which ideally is not yours. This might compromise your image and deter future buyers. You really have to invest in your image.
It is Impossible to Build a Brand or Authority
In this business model, all the successor credit goes to the manufacturers, wholesalers, or merchandise rather than you. It is the people who actually make, package, and deliver the product to the client that obtains the credit instead of you the marketer. This is definitely unfair on your part.
You end up working long hours, searching for clients and popularizing products, only for the real credit to be assumed by others who never labored for it. If you are wise, you should find a way of making the clients know that you are also partly responsible for the delivery of that product to them.
Complicated Shipping
Shipping under the normal retail arrangement is pretty simple. All goods are available in stock and you simply get the right one and send it wherever it may be required. Things are not the same though with dropshipping. Here, you do not stock the goods yourself. Also, different suppliers stock the goods.
So, if for instance, a client purchases three products which are stocked by three different suppliers, coordinating the delivery and charging of these three products may be tricky. At the same time, their shipping rates may also vary significantly. All these add to the complexity of the entire system.
Inventory Issues
Lastly comes the inventory issues. It is very difficult to keep an accurate track of inventory under this business model. That is mainly because it is not you who stocks the various merchandises. Sometimes, a client may order a good which is in fact out of stock and failure to deliver it may harm your reputation.
Apart from this, you may not be the only one who works with these suppliers. There are other marketers elsewhere who operate alongside you. Synchronizing your data may be tricky, given that you do not even know one another. This, of course, leads to unnecessary delays and frustrations.
Conclusion
Should you still build dropshipping stores? The answer is an absolute ‘YES.’ As you may have deduced from the foregoing conversations, the benefits of building a dropshipping store are too numerous to be overlooked. Moreover, it is also the business of the future as the article clearly notes. What then are you waiting for?
Simply find a suitable niche and specialize in it. You will also have to identify the many suppliers who handle your products of choice and develop some synergy with them. Only then will you be able to make the most of this business model. So… When do you plan to launch out into the business?
