What is Dropshipping? Is Dropshipping Worth It and Profitable

If you are looking for an online business opportunity, it is very likely that you have come across the idea of dropshipping. Dropshipping is an exciting online business model that generates high returns for new, aspiring, eCommerce entrepreneurs.

With a little bit of capital and some sweat equity, you can start dropshipping. The million-dollar question is: Is dropshipping worth it? Let’s get right to it so that you can get started on your new business venture equipped with all the relevant information.

What is Dropshipping? 

Dropshipping is a supply chain management method. There are three parties involved in dropshipping:

• Manufacturers

The manufacturers create products. Instead of selling them to the public, they sell the products in bulk to retailers and wholesalers instead. 

• Wholesalers

Wholesalers buy items from a variety of manufacturers and store them. Before selling them to the retailers, they mark them up. 

• Retailers

Retailers sell the products directly to customers, at a markup of course. 

Dropshipping is a kind of order fulfilment model for e-stores. In this method, a store doesn’t keep the products and items that it sells in stock. Instead, the store buys the product from a third party supplier and gets the supplier to ship it directly to the customer.

As a result of this, the seller doesn’t have to come in contact with the product and doesn’t have to handle the packaging, shipping, storage, etc.

How Does Dropshipping Work?

Instead of having a warehouse inventory, the merchants buy products from third party suppliers when the customers place an order. After a customer makes an order, the items are shipped to them directly. 

In this way, there is no need for the seller to handle the items directly. When it comes to ordering fulfilment and shipping, it is a hands-off process for retail store managers. There is no need for the merchant to stock the products, order inventory, or physically fulfil the orders by customers in any way.

Instead, the third party supplier will ship the products on the behalf of the merchant. Let’s make it even simpler for you. Let’s suppose that you are a retailer and a customer has placed an order with you. You will simply alert your dropshipping partner – it can be the manufacturer or the wholesaler. 

Your drop shipping partner will pack and ship the product directly to the customer for you, at a minimal charge. 

Is Dropshipping Legal?

Yes, dropshipping is completely legitimate. It is a legal order fulfilment model that hundreds of thousands of business owners all over the world use. However, you need to remain vigilant that you don’t do business with fishy suppliers who are illegally fringing on some other company’s property. 

You should register your dropshipping business, whether you are running it as a side-hustle or a full-fledged business. Look up the laws in your country for operating a business, taxes, etc. 

How Profitable is Dropshipping?

Many of you might be thinking, is dropshipping worth it and is dropshipping profitable? Drop Shipping is very profitable, especially for young and budding entrepreneurs. Dropshipping is a good model for entrepreneurs since running an online store working on the dropshipping model doesn’t need a lot of operational capital, unlike the traditional retail model. 

There is no need to open up a brick-and-mortar store. Instead, you can open up an online store and purchase wholesale from the suppliers who already have the warehouse space and the products. The shorter the supply chain is, the greater the profits will be as fewer parties will be taking a cut. 

Is Dropshipping Still Worth It?

Wondering is dropshipping worth it? Yes, dropshipping is still worth it – it is not ‘saturated’ or ‘dead’ as yet. Rather, it is quite the opposite, particularly after the pandemic, as many companies try to adapt to running a business online. However, the days of buying products from AliExpress, running a few Facebook ads, and making huge profits are over.

Dropshipping is very simple to get started with. You need to put in a little bit of effort, research, and hard work – you will definitely see the results! It is no longer about buying low and selling high – it is about making the right business decisions at the right time.

The Pros and Cons of Dropshipping

Like everything else in the world, dropshipping also comes with pros and cons. Let’s take a look at the pros and cons of dropshipping. 

Pros of Dropshipping

• Easy to Set Up

To get started with dropshipping, you don’t need to have prior business experience. Take some time, learn the basics and launch your business. All you need is the help of an ecommerce website building platform to launch your website and you will be good to go.

• Low Startup Cost

The startup costs are low as well, especially when you compare them with other kinds of business models. You don’t need a warehouse, a team to help you pack products, etc. You don’t have to worry about shipping, stocking, etc. This is the answer to the question, is dropshipping still profitable.

• Scalable Model

Dropshipping is easily scalable. As you scale the business up, you don’t have to change the business model at all. You will have to put more effort into marketing & sales as you grow. However, your day-to-day operations will remain pretty much the same apart from the fact that you will have to process more orders. 

Moreover, the infrastructure costs don’t skyrocket when you scale.

Cons of Dropshipping

• Slim Profit Margins

Thinking about how much do dropshippers make? Initially, you should expect slim margins. You can’t say that the venture isn’t profitable, but you need to keep in mind that the product margins might be small, especially in competitive niches.

• Complicated Order Process

The idea of dropshipping seems quite simple and for the most part, it is. However, when you source products and items from multiple suppliers, it might complicate the order process, from the cost of shipping to the timing of product delivery, etc. 

Now that you know what dropshipping is, how it works, and what are its pros and cons, you can get started with your business venture easily. Here’s to your successful future as an entrepreneur, folks!