Dropshipping is an order fulfillment business that is often considered a quick get-rich scheme. You are not obliged to keep the products in stock, which makes this business model easier to handle. Contrary to the popular belief, you won’t get rich overnight.
Sure, the dropshipping revenues we read about on the internet seem easy to earn- you just have to sell a product from a third-party supplier and keep a profit cut, right? But the day-to-day obstacles, drawbacks, proper management, and dropshipping risks are far from easy.
The business model surely allows you to earn thin dropshipping revenues at first. However, you can establish a stable business with months of hard work- just not as easy as you had hoped.
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You can only put the idea in this way- it is difficult to earn large profit margins from dropshipping only. You have to build your credibility in the e-commerce ground to improve your business and complement the existing services you are providing.
Dropshipping is a sideshow that overshadows the main event. Even though it takes months to make your strategy work, this business model offers enough benefits for the dropshipper to earn substantial profit in the long term.
All you have to learn is to use the right approaches to earn dropshipping revenues. You can consider the following approaches to use the dropshipping business model effectively:
Dropshipping is a long-term commitment that can turn unviable if you do not conduct proper market research. Start with temporary yet useful projects to earn thin revenue and make your way up to the top gradually.
Market research is important to calculate the dropshipping risks of trying out/selling new services or products. It is better to sell a product on a trial period instead of increasing your inventory costs at once, and that too, for an unpredictable product.
All the visible dropshipping risks will allow you to determine the worth of the product. In short, it would give you an estimate of the number of products you should buy to complete the initial stock.
Stocking your dropshipper cart with unpredictable products in bulk quantity will always increase inherent dropshipping risks.
Any new product can be a hit or a miss, but you can mitigate risks by testing out the new dropshipping item.
Dropshippers who have spent a long time in this business know that market fluctuations are not unpredictable. If you are using dropshipping as a medium to improve your e-commerce business, you won’t necessarily have to raise the warehouse and inventory costs.
A dropshipper supplier allows you to save money as you won’t have to overstock for meeting unlikely item maximums.
You won’t lose dropshipping revenues or sales, especially during the seasonal overflow. Even if an unexpected demand for an item comes in the market, you can always contact your dropshipping supplier and make profitable sales.
Dropshipping is a safeguard against all the unpredictable market fluctuations that e-commerce business owners face. The dropshipping model allows you to rely on pre-made orders. So, no worries about the warehouse or inventory costs.
The shipping complications in this business increase the dropshipping risks. One unfortunate complication of this business approach is that you have to pay a hefty shipping fee if you are farther away from the shipment centers or warehouses.
However, the problematic locations for dropshipping are easy to handle with a perfect strategy. You do not have to pay hefty storage prices or shipping fee that is too high. The idea to relocate your shipping center (for your e-commerce) means a lot of investment. However, the right approach to dropshipping solves it all.
You have to pay the hidden fee or tax charges if you are running a simple e-commerce business. But relying on dropshipping frees you from the frustration to ship outside the country or state.
Moreover, it is always fun when you can use this business model to test new neighborhoods, countries, or states. If you are establishing an e-commerce business with proper inventory and warehouse, I suggest relying upon dropshipping for a trial period to see if the idea is worth it or not.
Some products are high-maintenance and cost a fortune for e-store owners. That is why it is viable to dropship and earn a good profit rather than wasting the money in storing the product yourself.
High-end products come with a hefty shipping and storing fee. These products necessitate proper storage. Some of the examples are:
Fragile products require special shipping treatments because they have to be handled with care. However, this responsibility falls on the third-party supplier in case of dropshipping. You won’t have to care about the storage or packaging.
Dropshipping is perfect for selling large items in exchange for good profits. The e-commerce business owners fail to make up the costs for large-item storage.
It allows you to dropship high-end large items that come with a heft shipping fee.
Selling high-value items such as antiques and jewelry pieces are extremely easy with dropshipping. The third-party supplier provides item security that no warehouse can offer. One of the dropshipping risks is theft. You can leave this responsibility on the shoulders of the third-party supplier.
Are you thinking to sell a product that is sensitive to light or needs to be at a specific temperature? Dropshipping is a hassle-free order fulfillment method that requires suppliers to take care of special requirements/conditions for the product.
It does not make sense to pay additional and storage fees when you can dropship and earn a good profit.
Dropshipping requires successful branding and marketing, as opposed to other e-commerce methods. The focus of dropshipping is not on the product design. You get a commission on each sale. Therefore, you have to make as many sales as possible. But the higher the sales, the bigger the dropshipping risks.
Here is a quick heads up on dropshipping risks and how to avoid them:
The merchants of dropshipping are tied to their suppliers for earning profits. Dropshipping does not follow the B2B service protocol and the sale success, such as product quality, timeliness, and shipping rest on the shoulders of the third-party suppliers.
Even if a dropshipper does not make a mistake, his business can fail terribly if he has partnered with a bad supplier. The third-party suppliers must live up to their end.
Fraudulent suppliers prey on inexperienced or novice dropshippers, which is one of the biggest dropshipping risks.
Always rely on a tried-and-tested approach of finding a good supplier on the internet. Moreover, be aware of the following red flags:
Even if you get in a sharp frenzy with a bad supplier, you can use the Dropshipping Agreement contract to free yourself from the liability of the third-part seller’s actions.
Dropshipping vendors are bound to make thin profits as they perform less work. Moreover, the competitive pricing makes the profit margins as thin as a line. The e-commerce giants such as Amazon, eBay, and AliExpress are selling the exact product as you. Moreover, the competition of the merchants makes it harder to secure a good profit margin.
The only way to keep selling the items is to offer low prices besides branding and marketing. But that also means less commission for a dropshipping vendor.
The easiest way to increase your profit margins is to sell the item through the MAP (minimum advertised pricing) approach. If you sell the items using MAP, you won’t have to worry about commission cutting from the profit.
An attractive part of dropshipping is outsourcing fulfillment logistics. Yes, it frees the dropshippers of any hassle but they won’t have any control over the supply chain.
The dropshipper has to pay from his pocket if any fulfillment error occurs (outdated level of stock, overselling).
The product tracking app allows the dropshipper to mitigate dropshipping risks by managing all the marketplace channels. The software updates the stock levels automatically and removes products if they are out of stock.
Retail arbitrage allows the suppliers to buy from retail stores and sell at an online marketplace. Nowadays, dropshippers have started using this business model, which raises serious concerns about the online marketplace and puts the dropshipper’s reputation in jeopardy.
eBay and Amazon ban dropshipping arbitrage. The user agreement clearly states that reselling the items is not allowed. So better avoid using the arbitrage model on both the channels.
The dropshipping risks are not the impression that I am against dropshipping. It is quite the opposite, actually. The real setbacks occur when novice dropshippers do not consider the risks and the right approach to making dropshipping revenues.
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By Lisa W.
Lisa is an integral part of the Sell The Trend Family. She has a keen eye for spotting products right before they become big winners!
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