Research has shown that over 25 million Americans have started or are running a business, and 69 percent of those entrepreneurs started their businesses at home. If you’re considering starting your own business, there are many options available, some that you may have to open up a shop for and some that you can start in your garage or basement. For example, Dropshipping is a great business model that many people are beginning to use to make some extra money or even break free of their regular job and start a business. Because it’s simple and easy to do (as long as you have a business license and dependable dropshipping suppliers) and can be done from the comfort of your home, a drop shipping business may be your best option.
Whether you’ve been considering starting a dropshipping business or are just beginning to explore the idea, you can take advantage of many benefits. For example, with online shopping on the rise, the market seems to be growing, giving you plenty of space and opportunity to step in and fill your customers’ needs. No business model can be perfect, though; some cons come along with the pros of dropshipping. You’ll want to consider and weigh each one carefully before deciding.
The Pros of Dropshipping
● There’s Little Overhead. When it comes to starting a business, overhead can be quite expensive. Between the cost of rent, utilities, and equipment and any employees’ salaries, it adds up fast and can cut your profits. With a dropshipping business, your overhead stays low since you directly connect the manufacturer and buyer. Still, you don’t have to keep any inventory—you will only need basics, like a website.
● There’s No Need to Store Inventory. Although you may be selling the product on the manufacturer’s behalf, you are not responsible for storing and shipping the product(s). When you run a dropshipping business, the inventory burden is left with the manufacturer, reducing your costs dramatically and making it easier for you to operate anywhere you’d like.”
● You Can Offer More Variety. Because you don’t incur the cost of keeping inventory or paying for a place to store it when you run a dropshipping business, you can offer more variety to your customers than you might have otherwise. This means you can expand your offering from one or two products to many, reach more audiences, and open up more revenue opportunities.
● Startup Costs are Low. While you may pay up to or more than $100,000 to start a retail store, the main dropshipping costs are your domain name, web host, and payment processor, keeping costs much lower. Thanks to the ability that dropshipping gives you to keep your overhead low and avoid paying for inventory and a place to store it, the startup costs for a dropshipping business are relatively low as well.
● It’s Less Risky. Naturally, when you invest a lot of money into something that isn’t already running and guaranteed, there’s a risk. While dropshipping comes with some dangers, your initial investment means there’s less risk if something goes wrong, the business fails, or you can’t stick with it.
The Cons of Dropshipping
● You Aren’t Really in Control. While you may have control over your end of things, like what you offer and your website, you aren’t in control of the product itself, shipping times, product images, etc. This can be a big downfall for some entrepreneurs who want to be more in management and business.
● Your Prices May Not be Competitive. When you dropship, your prices will be determined more by the manufacturer than they will by you. This will mean that marketing might sometimes be difficult and make it harder to stand out from others in the market.
● Your Profit Margins are Smaller. Because your pricing will be set mainly by the manufacturer and you’ll want to remain as competitive as possible, your profit margins will be smaller when running a dropshipping business. This can make it difficult to be as profitable as you’d like, especially if you aren’t selling many products.
● You’re Limited in Your Customer Service. While you’ll be providing customer service to those who make purchases from you, your ability to provide customer service will also be limited because you aren’t fully in control when running a dropshipping business. You won’t be able to ship out a new product to replace a damaged one or to vide faster shipping than wha manufacturer has available, for example.
● You’ll Have to Compete to Survive. Competition is healthy, and virtually every business has to compete to survive, but the competition level may be more than you would like when it comes to dropshipping. With other drop shippers and people and companies selling similar products, it can be hard to make yourself stand out.
Final Thoughts
Despite the cons, there are a lot of benefits to running a dropshipping business. The fact that the overhead is lower than other businesses and more flexibility as to where you can run your business plays a big part in deciding whether you should start a dropshipping business.
What products do you plan to sell through your dropshipping business?
