Is Drop Shipping Worth It?
Table of Contents
- What is Drop Shipping?
- Why Should You Try Drop Shipping?
- What Should You Watch Out For?
- Is Drop Shipping Worth It?
Maybe you’ve been brainstorming business ideas, and someone suggested that you try drop shipping. Or maybe you’ve been on the lookout for a side hustle, and the promise of drop shipping’s low startup costs appealed to you. Whatever the reason, you’ve started looking at drop shipping as one of your top options for earning some extra cash.
That raises one important question: Is drop shipping worth it?
In this article, we’ll delve into drop shipping’s biggest pros and cons to help you decide whether to start your own venture.
First, let’s make sure we’re all on the same page. “Drop shipping” refers to a business model where you partner with suppliers to sell products. You’ll take care of marketing and finding buyers; your suppliers take care of inventory management and shipping out the actual orders.
If you’re completely new to the industry, you’ll need a bit more information. Check out our detailed overview to find out more about what drop shipping is and how it works.
The drop shipping model offers attractive advantages to new and entrepreneurs alike. We’ve boiled these down to five key points:
Low Startup Costs
Drop shippers don’t need to buy an initial stock of products, maintain an inventory, or invest in a warehouse or brick-and-mortar storefront. In fact, you could start a drop shipping business with only your computer (and an internet connection) in hand.
That’s all thanks to the fact that you’re not manufacturing, storing, nor delivering the products that you choose to sell. Your suppliers handle the physical side of order fulfillment and all the expenses that come with it.
(Confused by the industry lingo? We’ve also got a drop shipping glossary to help you talk the talk like a true drop shipper!)
Less to Manage
This is closely related to the first point. Imagine being in charge of everything from inventory upkeep to product shipping: you’d need to check on shelves and shelves of products, pack orders, and arrange delivery to each customer. On top of all that, you’d still need to work on winning over more customers.
Drop shipping cuts the workload in half: somebody else minds the items for you. This leaves you free to focus on the sales side of your business. What’s more, this makes drop shipping a promising option for people who don’t have a lot of time or manpower for handling numerous items every day.
Control Over Your Own Site
This is where drop shipping comes out ahead of popular marketplaces like Amazon or Etsy. When you sell as a retailer on an established portal like Amazon, Etsy, or eBay, your business is subject to the rules and operating standards set by that website. Say you’re selling secondhand books and Amazon suddenly decides to ban secondhand book sales completely — your business would be toast.
Many drop shippers build their online stores using platforms like Shopify. These services grant control over your website: you make the rules; you choose what and how to sell. More importantly, your online store faces less risk of being shuttered due to a simple change in website policies.
Numerous Suppliers and Products to Choose From
You can build your own product catalog from the millions of products and suppliers available online. The sheer variety of choices at your fingertips gives you tremendous flexibility to start with: from plus-size shapewear to smartphone accessories and everything in between, there’s probably at least one supplier for it. You’ll have more room to identify a profitable niche and carve out your own space in the vast drop shipping landscape.
Plus, an abundance of suppliers means you’re not locked to one supplier’s pricing. You can canvass your options to find the right balance of product quality and wholesale pricing for your particular needs.
Of course, this means your store’s earnings depend on your ability to pick winning products that come at a good price. This can be a daunting ask if you’re completely new to e-commerce, but we’ve got your back. Check out our guide to picking the best products to dropship if you’d like tips for building a great store catalog.
Freedom of Location
As mentioned earlier, drop shipping doesn’t need you to invest in a lot of physical resources. This means you can run your business from almost anywhere, so long as you have a way to market to customers and contact your suppliers. Whether your trip is to Denver or Denmark, business doesn’t have to stop or even stutter. You can switch offices any day of the week, or you can check on an urgent flagged delivery while waiting for your turn at the grocery checkout.
Drop shipping isn’t all fun and profit, though. As with any business model, drop shipping poses challenges to any entrepreneur, new or otherwise. We’ve covered some of the biggest drawbacks in our introduction to drop shipping, so be sure to check that out. Aside from those, there are other details that might give a new drop shipper some pause:
Many drop shipping suppliers charge an additional fee to account for the costs of packaging and shipping. This adds to the cost you’re paying for each item, ultimately eating into your profit margins. Most fees are minimal (around 2-5% per item), but they still add up over time.
Many industry experts peg drop shipping’s average profit margins at around 20-30% of total sales. Depending on your target earnings and the viability of your chosen products, those returns can be a bit low.
Sure, you’re not in charge of product inventory or shipping, but you should still be able to keep an eye on these. After all, your customers will judge your business by how well you can deliver—literally. This might mean having to be in constant contact not just with customers, but with suppliers as well. Bridging the two can get messy: if a customer wants to return a product, for example, you’ll need to liaise with your suppliers in their stead.
If you’re working with multiple suppliers or juggling several problematic orders or deliveries at once, things could get dicey.
Here’s the thing: you won’t get an overwhelming YES or NO here. This goes for any business model, not just drop shipping. If you’re willing to put in the work and do your research, drop shipping can be a great way to earn money, whether as a side hustle or as your main business.
Drop shipping can be an especially stellar option if you’ve got very limited time, starting capital, or manpower and resources. It can also be a great, cost-effective way to test the viability of your chosen product niche before you go all-in on a new business. If you’d like to give drop shipping a try, check out our reviews of popular drop shipping platforms today!