You have probably watched lots of Youtube videos, articles and posts about how great Dropshipping is! Even some self claimed gurus saying how rich you can get within a month or two.
And now, you are on the verge of deciding to jump into dropshipping or not. You want to know if Dropshipping is worth it?
Dropshipping is absolutely worth it in 2020 and even in 2021 followed by many years to come if you are looking to earn a good amount of money building a short term business (more on this below). But, Dropshipping is not worth it if you are looking to build a long term sustainable business that can give you healthy returns for months and years to come.
As a dropshipper with little success and valuable failures, I have a lot to share here with you!
You must be also thinking if Dropshipping is profitable? If so, what sort of profits I can expect from it? How much can I earn etc. I've got you covered here with some real numbers and not just theory!
Check out below a step by step guide detailing the pros and cons of Dropshipping along with what to expect and what not.
What is Dropshipping?
Not going to bore you with the standard dropshipping definition but giving my point of view on dropshipping.
Dropshipping is also an e-commerce business but done in a slight different way where you don't hold any inventory. You pick up some products from AliExpress, Oberlo, Alibaba or privately from a supplier and list them on your Shopify store for sale. When a customer purchases a product from your online store, you pay the supplier to directly ship the product to your customer's address without having to touch the inventory.
It's just another way of doing an e-commerce business without getting much involved in the supply chain process.
Let me tell you why Dropshipping is worth it?
There are a number of very good reasons to get into the booming dropshipping business.
- Quick Money
When I started dropshipping in 2019, I was blown away looking at the profits (300$) I made within the first few days. Although they are not huge but comparatively much higher than any other business considering the time and effort invested.
I've tried pretty much every business under the sun and some worked out and others didn't. But, it made me realize that dropshipping can really get some quick money.
Pro Tip: Make sure to sell products that can be priced at least 30$. I would not recommend selling anything under 30$ as you won't have any room for profits otherwise considering the growing ad costs in dropshipping.
2. Low Risk
This is the most attractive part of dropshipping business that gets thousands of people into it. This is the no.1 reason dropshipping has a low barrier to entry which is both good and bad. Bad because it created additional competition
You don't need to purchase any inventory in advance or make huge investments to start a dropshipping business.
Initial costs are just the ones listed below till the time you decide to scale and get some fancy themes or plugins to convert more visitors.
The max you might lose is the amount spent on the monthly Shopify plan and the cost for domain registration. Of course, your time and effort should also be considered here.
- Shopify Store - 29$ per month with a 14-day free trial
- Domain - 14$
3. Plenty of Options
In a traditional e-commerce business where you have a bulk of stock purchased upfront, you are pretty much struck with that product till you sell them completely.
Whereas in a dropshipping business, you don't have to sit with one or a bunch of products as you don't purchase any inventory upfront.
You have unlimited freedom to swap products, jump niches and create as many stores and brands you want which is a huge advantage.
I've had this problem where a product might sell well for a certain period of time but after a point, it might die down and doesn't get you any sales.
That's when you can switch products or even niches. Nothing stops you from doing so.
4. Healthy Profits
If you can think and choose your products wisely by picking the ones that have a high perceived value, you can make good profits.
For example - Watches, Jewelry, Electronics or Health/Fitness products that are unique or can be presented in a unique angle to the audience can get you healthy profit margins.
This is where your marketing skills will definitely come handy. There are times where I struggled with Ad creatives as they were boring to be honest. I went back to the drawing board, analyzed how other successful dropshippers are handling this and came back strong.
Be open to learning and you need to be on top of these things at all times especially in a fiercely competitive dropshipping world.
Having said these, I'd like to show some real numbers from my experience to set your expectations right. While this might not be the case for everyone but will give an idea on what to expect.
Latest revenue numbers from my new dropshipping store
- Product Costs - 250$
- Ads - 300$
- Sales - 1042$
- Profit - 492$
This is a 1 product store in the consumer electronics niche that earned me healthy profit margins up to 40% after deducting taxes and other operating expenses like the shopify hosting plan and 2-3 plugins.
This is not to say that every product will get these kind of returns as I've had products that burned close to 1000$ in Ads with less than 100$ worth of sales.
I can say 1 out of 20 products might see some sort of success like this and that too if you take the right steps starting from Product research till Customer service. There are many places where things can go wrong that could cost you all the sales you need to make a difference.
Pro Tip: Try to sell products that have high perceived value.
For example - Watches. Find a watch that has a unique design be it the watch dial, strap or it's functionality altogether like a Smart watch.
Let's say you source the product from your supplier for about 10$ and add another 8-10$ for shipping costs and sell it for 50$ or 60$ which will get you around 30$ to 40$ in profit.
Let's assume you get a ROAS with may be 5 or 10$ conversion cost per purchase. Even then, you end up with a net profit of 15-20$ which is descent in the current situations.
If you apply the same calculation to a low ticket product, you wouldn't have room for profits and might even end up in losses when your ad costs fluctuate which happens quite frequently.
Why Dropshipping Is Not Worth It!
There are downsides to every business and the same goes for Dropshipping business too. If you are looking to build a long term sustainable business, then dropshipping might not be for you. Few pro tips included below to convert Dropshipping cons to pros!
- Inventory Control
One of the advantages we've talked above where you don't need to purchase any inventory upfront also poses a disadvantage.
In dropshipping business, you don't have control over the inventory at all as the stock might run out at any time or just the inventory processing could be delayed by the supplier that could cause a huge dent in your dropshipping business.
You will always be dependent on your supplier to maintain adequate stock levels of the product you are selling.
2. Product Quality
Again going back to the fundamentals of dropshipping, you don't have any inventory which might lead to product quality issues as you don't know how the product looks, feels in hand and the type of experience it delivers to your customers.
This can be a major issue as you might end up refunding all your customers if the product quality suffers or even worse getting tons of negative reviews from customers all over social media that will hurt your business.
Pro Tip: Always order a sample from your supplier either to your address or send it to your friends/family to check the product quality before investing on the product. Believe me, this saves you from a lot of hassles down the lane.
3. Short Term
As I've mentioned earlier, dropshipping is a short term business considering the limited success you can have with a product. Unless you keep starting the business from scratch frequently which is to create new stores every few weeks or months, this cannot be a long term business.
Another way to make use of dropshipping in a good way is to transform the dropshipping store in to a brand by owning some inventory at hand once you find a successful product or a set of products.
4. Ad Costs
Due to the fierce competition in the dropshipping business, ad costs are sky rocketing year on year and it's getting harder to maintain healthy profits after spending a huge amount on ads.
Especially Facebook Ads, which are the most used ones by thousands of dropshipping stores across the world. Facebook Ads are based on auctions and every ad targeting the same audience is a competition to you increasing the ad costs for everyone.
You need to be really creative and smart to keep your ad costs low to sustain in the dropshipping world.
5. Long Shipping Times
Last but not the least, shipping times are the biggest issue for any dropshipping store even today.
In these Amazon Prime days, it's difficult to keep customers waiting for more than 15 days struggling to ship the product from suppliers in China. On top of this, most of the supplier companies take 2-3 days and sometimes more to process your order even before the product can be shipped out which is an added pain.
Till that point, you wouldn't even get a tracking number that can be provided to your customer which can drive some customers into panic mode. This can also create some trust issues between you and your customers considering a huge amount of fake stores online.
Pro Tip: To avoid the long shipping times, you can search for a private supplier on Alibaba and ask them to ship to your customers directly. Private suppliers can provide faster processing and shipping times as they have direct contacts with courier partners. I've experienced faster shipping times 8-12 days from China to US/UK with private suppliers on Alibaba. I'd definitely recommend trying that way.
Now, considering all the above pros & cons of Dropshipping, I can say that the pros outweigh cons if you take care of the cons pro-actively.
To summarize, Dropshipping is definitely worth it in 2020 and years to come as long as you dedicate and focus 100% on the business starting from picking the right niche, product research, supplier vetting, store design, product copy, ad copy, marketing etc.
It is worth noting that dropshipping cannot make you a millionaire as being glamourised by some self claimed dropshipping gurus. Start small and smart which will also help you stay cautious at every step instead of spending for any fancy stuff being recommended by these gurus.
One strong recommendation I'd like to give is not to spend any money on dropshipping courses or consultations as they won't help in any way. Instead, I'd recommend trying things practically on your own one step at a time that will improve your skills as you go which is an asset. Moreover, the info shared in most of these expensive dropshipping courses are all available for free online.
There is nothing new in those courses and it will be worth using them on your store or ads instead to earn some hands on experience with dropshipping.
Don't spend more than 200$ on a product if it's not generating any sales. Just move to another product. But with every failing product, make sure you do the Product research for your next product very well to avoid wasting more and more money on not so worth products.
Deciding when to stick to something and when to leave is the key to success.
To start a dropshipping store, initially you'd need around 10-12 hours including 5-6 hours of solid Product/Market research.
- Product/Market Research - 5-6 hours
- Store Building - 3 hrs
- Ad Creatives - 2 hrs
- Marketing - 1 hr
Once the store is published, you will need to spend atleast an hour or two on a daily basis in your initial days to ensure things are going as expected.
Hope this helps you take your first step in dropshipping. All the very best and drop a comment below if any questions :)