Due to its low cost and simplicity to set up, dropshipping has become one of the most popular eCommerce business models of modern times. But is dropshipping just hype or is it really a good working business model?
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How does dropshipping work?
Dropshipping has been hyped for one main reason: it enables you to sell products without having to keep any inventory or even having to purchase the stock in the first place. Instead, the order is entirely fulfilled through a third party that delivers the product directly to the customer. The third-party could be a distributor, manufacturer, or vendor. So, as a new dropshipper, you would find one or more suppliers and set up an eCommerce store online. When a customer purchases a product through your store, the supplier is notified of the order and then packages and ships the product to the customer. With very little work to do yourself on the order fulfillment side, it is no wonder the dropshipping business model has become so popular.
So, is dropshipping all hype or a working business model?
On the surface, dropshipping is indeed a good working business model. The main problem is the fierce competition. To make a success of your dropshipping business, you need to spend a lot of time and effort, and some money, in growing your brand and using effective marketing strategies to take on your competitors. So, if you think you can make loads of money by just setting up an online store and not doing anything else, you have been listening to the hype. On the other hand, if you have good business sense and use the right strategies and tools, dropshipping can be a lucrative business model.
A Working Dropshipping Business Model Requires the Right Tools
It is a very good idea to use dropshipping automation tools to help you make your eCommerce business a success. Many new dropshippers do not realize that dropshipping involves many moving parts that require experimentation with various automation tools. If you want to make your dropshipping business a success, you need to ensure things like inventory levels, product descriptions, and prices are always up-to-date. Automation software automatically updates such things. It also allows you to source one product from multiple sellers, so if one supplier is out of stock, you can still fulfill a customer order via another supplier. Other automation tools include ones for email marketing, customer service, product management, and more. When dropshippers know how to best utilize automation tools, they stand a much better chance of making the dropshipping business model work.
Does a dropshipping business really cost nothing to set up?
In theory, setting up a dropshipping business does not have to cost you anything. The hype that is always heard around dropshipping uses this fact as one of the key driving points, but the truth is a little more complex. While it is true that you could spend no money on your eCommerce venture, it will not be successful if you invest zero dollars. Dropshipping is undoubtedly one of the least expensive business models to utilize, but you still need to consider costs like the following:
- Having stores on multiple platforms, such as Shopify and WooCommerce. To attract the most customers, you need to have multiple sales channels. Consider spending around $50 a month for having an eCommerce store on various platforms.
- Payment processing, which is typically 2.9% per transaction. Those small costs can soon eat into your profits.
Marketing, which demands the most investment. You can start as little as $10 or $20 with things like Facebook ads, but if you really want to get your business known and grow your customer base and brand, you should invest hundreds of dollars each month into effective marketing campaigns that target your demographic audience.
