Pros and Cons of Running a Dropshipping Business

If you’ve been toying with an idea to start dropshipping business, you’re certainly not alone. Dropshipping often looks like a lucrative opportunity that does not require significant investment and can provide quick returns. 

But when you take a deep dive into details, you realize that everything is not as cut and dried as it might seem. Building relations with partners, finding reliable suppliers and acquiring first customers can become a challenging experience even for seasoned entrepreneurs. Therefore it can be useful to learn about the main principles of running dropshipping business and discover its pros and cons before making a final decision.

Mementia, a trusted eCommerce expert, gives you an overview of the benefits, drawbacks and pitfalls of this business opportunity. 

Dropshipping business: How it actually works?

Before we get into details of how to start dropshipping, let’s cover the basics. 

What is dropshipping? Simply put, basic dropshipping is a business model that allows you to sell products without storing them. Dropshipping suppliers become your partners who deal with manufacturing, shipping and storing the goods. 

Your task is to find customers, negotiate with them and ensure they are satisfied with their purchase. You should also provide a platform for selling goods, such as a website or an account on a popular social network where you will interact with your target audience. 

 

Advantages of Dropshipping

Starting a dropshipping business is often seen as an easy-to-earn venture, and to some extent it is actually true. With a low entry barrier, few risks, low overhead costs and insignificant investment required to start off, it provides up-and-coming entrepreneurs with an excellent opportunity to try their hand in eCommerce. 

1. Easy to start and maintain 

If you’ve ever wondered how to start dropshipping, we say - “Just start doing something!”. Compared to other industries, such as software development or manufacturing, dropshipping is easy to start and run. You don’t need to find investors, pitch your idea, develop tedious business plans and run estimates. 

All these stages can be skipped if you have enough money in your pocket for building a website to operate your e-store. Then you approach a trusted vendor, invest some money at the very beginning, find dropshipping suppliers and start selling your goods. Yes, it’s that simple!

Expert tip: we recommend dealing with professional web development companies with expertise in dropshipping. Along with a reliable and scalable website, they will provide you with quality consulting services that you’ll need for your business to grow. 

2. Low-risk 

Since you don’t have to invest lots of money in the inventory, the risks are pretty low. You pay for the product if a customer purchases it, already ensuring a profit margin. Also, if you see that your customers are unhappy with the product range, you can stop buying from one supplier and look for other ones. 

3. No inventory management

Inventory management is often one of the factors that discourage people from starting an eCommerce business. Traditionally, you find a good supplier, order products, wait for delivery and stock the goods for a while until your customers buy them. 

It is a complex process that brings extra costs. When you scale your store, you should find a place to store all these products. The major advantage of dropshipping is that it eliminates all these worries and delegates this task to a supplier.

4. Highly scalable

It’s super easy to scale your store at any stage of your business development. You don’t need to run complex negotiations, look for other partners and save up more funds to purchase new goods. 

With dropshipping, you can provide your clients with something everyone adores - a wider choice. By offering your website visitors a greater variety of goods, you make it easier for buyers to find the right match. 

5. Clear and transparent cash flow

Dropshipping advantages include clear cash flow. Compared to a traditional store, where you are responsible for developing a pricing strategy and profit margins, a dropshipping business has a clear process which includes a cut for you from every purchase. 

 

Disadvantages of Dropshipping

1. High reliance on stock

On one hand, not having to deal with inventory management is good - no inventory, no issues. On the other hand, you’re not aware of the current inventory levels and can’t inform your customers immediately if the items they ordered are in or out of stock. 

If you run a dropshipping business, establishing a reliable communication channel with your partners is a must. Ask them to keep you in the loop about all stock changes and possible shortages to make sure you can provide relevant information to your clients. 

2. Lack of product information

If you don’t have enough info about the product, it might be difficult to answer your customers’ questions. The inability to provide information about the items in your store can instantly undermine the trust between you and your customers, leading to a decrease in profits. 

3. Fierce competition

According to Google Trends, dropshipping is surging. With the coronavirus outbreak, people started looking for ways to digitalize their businesses and to move their operations online. But with the increase in popularity comes an increase in competition too. You should have a well-thought-out sales strategy, quality products and exceptional customer service to remain competitive on the market, 

 

Jumpstart your dropshipping business with Mementia!

To succeed in dropshipping and stand out in a saturated market, you need expert consulting to help you boost your business. Reach out to Mementia, an experienced web development provider, to get first-class services tailored to your needs and goals.

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