Research has shown that over 25 million Americans have started or are running a business of their own, and 69 percent of those entrepreneurs started their business at home. If you’re considering starting your own business, there are a lot of different options available to you, some that you may have to open up a shop for as well as some that you can start out of your garage or basement. Dropshipping, for example, is a great business model that many people are starting to use as a means of making some extra money or even breaking free of their everyday job and starting a business of their own. 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 own home, a dropshipping business may be your best option.
Whether you’ve been considering starting a dropshipping business already, or are just starting to explore the idea, there are a lot of benefits that you can take advantage of. 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 the needs of your customers. No business model can be perfect, though, and some cons come along with the pros of dropshipping. You’ll want to consider and weigh each one carefully before deciding to go ahead.
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 as well as the cost of the salaries of any employees, it adds up fast and can cut into your profits. With a dropshipping business, though, your overhead stays low since you are a direct connection between the manufacturer and buyer, but don’t have to keep any inventory—you will only need basics, like a website.
● There’s No Need to Store Inventory. When you run a dropshipping business, the burden of inventory is left with the manufacturer, reducing your costs dramatically and making it easier for you to operate from anywhere you’d like. Although you may be selling the product on the manufacturer’s behalf, you don’t have the responsibility of storing and shipping out the product(s).
● 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 that you can expand your offering from one or two products to many, reaching more audiences and opening up more opportunities for revenue.
● Startup Costs are Low. 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. While you may pay up to or more than $100,000 to start a retail store, the main costs of dropshipping are your domain name, web host, and payment processor, keeping costs much, much lower.
● It’s Less Risky. Naturally, when you invest a lot of money into something that isn’t already running and guaranteed, there’s risk. While dropshipping comes with some of its own risks, the initial investment that you make means there’s a lot less you risk in case 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 control and involved in a 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 can 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 a lot of product.
● You’re Limited in Your Customer Service. While you’ll be providing customer service to those who make purchases from you, because you aren’t fully in control when running a dropshipping business, your ability to provide customer service will be limited as well. You won’t be able to ship out a new product to replace a damaged one or to provide faster shipping than what the 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 when it comes to dropshipping, the competition level may be more than you would like. With other dropshippers out there, and people and companies selling similar products, it can be hard to make yourself stand out.
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 there’s more flexibility as to where you can run your business plays a big part when it comes to deciding whether or not you should start a dropshipping business of your own.
What products do you plan to sell through your dropshipping business?