1 September 2022

E-commerce Dropshipping: Benefits, Disadvantages, and How To Get Started

You’ve probably heard of the term e-commerce dropshipping. But are you familiar with what it is and how you can do it?

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If you’re unfamiliar with the term e-commerce dropshipping, don’t worry; you’re not alone.

Dropshipping is a business model in which e-commerce entrepreneurs sell products without carrying any inventory. Dropshipping has a lot of benefits, but there are also some challenges you should be aware of before getting started.

In this article, we will go over 13 things you should know about e-commerce dropshipping, and how you can get started.

What Is e-commerce dropshipping?

E-commerce dropshipping is simply when a customer places an order, the supplier will then ship the product directly to the customer’s door.

Dropshipping apps like Shopify lets you add products from various suppliers into your shop to fuel your product offering.

When a customer buys something, the supplier ships it directly to them from their warehouse. Automating your business processes is what allows for massive scalability.

This business model has a lot of advantages:

You don’t need to worry about excess inventory
You don’t need to deal with shipping products
You don’t need to create a product inventory

E-commerce dropshipping stores are easy to start up and manage and don’t require a lot of financial investment.

However, there are also some downsides to this business model, which we’ll discuss later.

The benefits of e-commerce dropshipping

There are definitely pros and cons to running an e-commerce dropshipping business.

On the one hand, you have a lot of flexibility regarding what you sell and how you market it. But on the other hand, you’re relying on someone else to handle the fulfillment process, which can sometimes be slow or unreliable.

All in all, e-commerce dropshipping is a great way to get started in the world of e-commerce, but it’s essential to be aware of the risks and challenges involved to make the most of this business model.

1. Zero upfront inventory costs

As the name suggests, one of the biggest benefits of dropshipping is that you don’t have to carry any inventory.

When a store owner dropships, they work with a supplier who sends products directly to customers.

This process eliminates the need to worry about excess inventory, as you’re only ever ordering the necessary amount of products to meet the demand from your customers.

2. No logistical headaches

Another significant benefit of dropshipping is that you don’t have to worry about any logistical headaches that come with running a physical store.

All you have to do is focus on marketing and selling your products, and then let the supplier take care of packing and shipping them directly to your customers.

That’s a massive weight off your shoulders, and it allows you to focus on growing your business.

3. Operate from anywhere

One of the best things about dropshipping is that you can operate your business anywhere. As long as you have an internet connection, you can take care of your store and make sales.

This is a massive advantage because it means that you can travel and still run your online business.

You can also take time off when you need to, which is a huge plus. It’s also a great way to avoid distractions and focus on your business goals.

4. Easy to start an online store

Dropshipping is one of the easiest business models to start.

Simply create an account with a dropshipping platform like Shopify, list products on your store, and then when you make a sale, the supplier will ship the product directly to your customer.

This makes it an excellent option for entrepreneurs new to e-commerce who don’t want to risk investing in inventory that might not sell.

It’s also a great way to test out new products before you invest in manufacturing them yourself and building a legitimate brand.

5. Easier to test and scale

When people are dropshipping, they can easily add new products to the store to see how they perform.

If they don’t do well, you can always take them down without significant consequences.

Scaling is also a lot easier with dropshipping, as long as the supplier can manage to deliver and increase stock levels.

6. Wide selection of products to sell

When you dropship, you’re not limited to the products your supplier offers. Instead, you can choose from an entire catalog of manufacturers — which means you can access a wider selection of products.

This is a great benefit because it allows you to find products that are in demand and match them with the right suppliers.

It also allows you to cater to specific niches, which can be a great way to attract more customers.

Disadvantages you should know about dropshipping

I know what you’re thinking — why would anyone want to run a business without any disadvantages?

Dropshipping is no different from any other business model on the planet, and you need to be aware of the risks associated with dropshipping to make the best-informed decisions.

The most significant disadvantage is relying on someone else to fulfill your orders. If that supplier goes out of business or decides to stop dropshipping, you’re screwed.

You also don’t have control over your inventory. This can be a significant issue if there’s a sudden change in demand and you don’t have the inventory to meet it.

Let’s dive into more details.

1. Low profit margins

Here’s the thing about dropshipping: the profit margins are typically lower than if you were to sell products yourself.

The reason for this is pretty straightforward: when you’re dropshipping, you’re not actually buying any products.

You’re relying on a third party to ship products directly to your customers. This process can add an extra layer of complexity (and time) to the shipping process, which means you can miss out on potential profits.

And physical products generally have lower profit margins compared to online products that don’t require any shipping processors or third-party providers. The manufacturer needs to take its cut for producing the products.

It’s something to keep in mind if you’re thinking about starting a dropshipping business.

2. Shipping can get complicated

One of the potential disadvantages of dropshipping is that it can get a little complicated when it comes to shipping.

This is because you’re relying on your supplier to send the products directly to your customers, which means you need to have a sound system in place for tracking orders and ensuring that everything is running smoothly.

If you’re not careful, you could end up with a lot of unhappy customers who are waiting for their products and don’t understand why they haven’t arrived yet.

So make sure you set up clear guidelines for your supplier and keep track of all the orders yourself so that you can quickly address any problems that might arise.

3. Highly competitive

The third disadvantage of dropshipping is that it’s highly competitive.

Because this business model is so popular, many people are doing it, which means fierce competition.

To be successful, you need to find a way to differentiate your store from the rest and offer something your customers can’t get anywhere else.

You also must be strategic about the products you choose to stock in your store.

4. Inventory issues

Another downside to dropshipping is that you have less control over your inventory.

If the supplier runs out of stock, it’s up to them to let you know, and then you have to scramble to find a new supplier in a worst-case scenario.

This can be a huge pain, especially if you’re running a busy store.

It’s also worth mentioning that your supplier might not always have the latest and greatest products in stock, which can be frustrating if you’re trying to stay ahead of the curve.

5. Supplier errors

Since your supplier handles most of the fulfillment process, it’s up to them to get the products to your customers on time.

And if they make a mistake, it will be your fault.

This can be a major inconvenience for customers, and it can also damage your reputation. So it’s vital to choose your supplier carefully.

6. No control over the supply chain

The supply chain is entirely out of your control when you’re dropshipping.

This is one of the biggest disadvantages of this business model, and you need to be aware of it before you start.

This means that if there’s a problem with the supplier, you’ll have to wait until they get back in stock, and then you’ll have to place another order. This can be frustrating when dealing with time-sensitive products for trends and holidays.

7. Difficult to build a brand

You’re essentially relying on other people to sell your products, you don’t have as much control over how your brand is represented.

And if you’re not careful, you could end up with many products that don’t reflect your brand’s values or mission.

It can also be tough to differentiate yourself from all other stores as you’re selling the same items.

But with creativity, marketing, and hard work, you can set yourself apart and create a successful e-commerce business.

How to start an e-commerce dropshipping store

If you’re thinking about starting an e-commerce dropshipping business, here are the five steps to getting started in the right direction:

1. Market research

There’s a lot of information out there about how to start a successful dropshipping store, but before you can even think about that, you need to do your research.

That’s where market research comes in. Market research is studying your target market—that is, the group of people you plan to sell your products or services to.

This involves gathering data about who they are, what they want, and what they’re willing to pay.

It’s important to do your research before you launch your store because if you don’t know who your target market is, you’ll have a hard time selling to them.

And without a solid marketing strategy in place, your store is doomed to fail.

2. Source products from suppliers

The second step to starting a successful dropshipping store is sourcing products from suppliers.

There are a few things to keep in mind when looking for suppliers:

Make sure they offer unique products that you can’t find elsewhere. This will help you set yourself apart from the competition.
Make sure the supplier has a good reputation and is reliable. You don’t want to partner with someone who will let you down at the last minute.
Make sure the supplier offers competitive prices and good quality products. This is key for maintaining your margins and ensuring that your customers are happy.

3. Choose the best dropshipping suppliers

You need to consider a few things when choosing your dropshipping suppliers. Not all suppliers are created equal, so you’ll want to do your research to find the best ones.

Here are some things to consider:

Reputation: How long have they been in business? Do they have a good reputation?
Range of Products: Do they offer a wide range of products, or are they limited to a few categories?
Quality of products: Are the products high quality? Are they made well?
Prices: Are the prices competitive?
Customer service: How good is their customer service? Do they offer good support?

Take your time and compare different suppliers before making your final decision.

4. Build your dropshipping website

Creating a dropshipping website and a store has never been easier with the help of modern dropshipping platforms. These builders make it easy to create a website without any technical experience.

There are many different drag-and-drop builders available, but my personal favorite is Shopify.

Shopify is the most popular e-commerce platform in the world and it makes setting up a website quick and easy. Plus, they offer a free trial so you can test it out before you commit.

It’s very intuitive and you can set up a basic store in a matter of minutes. There are also a ton of guides on YouTube on how to set up your Shopify store as well.

5. Promote your dropshipping store

Now that you know what dropshipping is and how it works, it’s time to start thinking about promoting your store.

The best way to get the word out is by using social media. You can create a page for your store on Facebook, Instagram, or Twitter and start sharing your products with your followers.

Dropshippers love to utilize both Instagram and Facebook ads in order to hit their target market effectively and usually include videos of customers using the products.

But if you don’t want to pay for ads then creating organic traffic through YouTube videos and blog posts is another alternative.

Be aware that generating organic traffic takes time (months) and is a long-term game for people serious about building a brand that lasts.

Conclusion

Dropshipping is a great business model for new e-commerce entrepreneurs. It’s simple to set up and manage and doesn’t require a significant up-front investment.

You can also run your dropshipping business in your spare time – you don’t need to quit your job to start a successful store.

Just don’t forget to take your time and learn dropshipping through a ton of online resources so you can improve your knowledge and skill set!