With the many ways you can make money online today—such as affiliate marketing, e-commerce and content marketing—you might wonder if dropshipping is still a lucrative option. The simple answer is yes, dropshipping remains a worthwhile way for digital entrepreneurs to earn big. However, this strategy doesn’t come without its challenges.
In this post, we’ll explain what dropshipping is and discuss its pros and cons. We’ll look at the cost, competition, suppliers and marketing, and then explore what it looks like to launch this type of business in 2022. Let’s dive in!
What Dropshipping Is
Dropshipping is an order fulfillment business model where sellers act as middlemen between customers and wholesalers. The factor that makes dropshipping unique is inventory. In traditional retail, shops (either brick-and-mortar or online) stock their products and store them until they’re all sold.
Dropshippers, on the other hand, don’t have any inventory. Instead, store owners market products that are stored by third-party suppliers, who then handle the packaging and shipping.
That’s why dropshipping is so attractive—retailers don’t have to handle storage, packaging or logistics. All of that is managed by the supplier. Dropshipping stores can also be particularly appealing to digital entrepreneurs because they’re flexible and relatively easy to launch.
In addition, dropshipping is a growing market that shows no signs of slowing down. According to AppScenic, the industry is expected to reach approximately $558 billion by 2025. That means there’s never been a better time to consider if this strategy is right for your needs.
The Pros and Cons of Dropshipping
While dropshipping is a great way to get into e-commerce, it’s important to note that it’s not a get-rich-quick solution. A successful business will still require hard work, strategy and startup costs. Challenges such as competition, low profit margins, and muddled supply chain connection can also be discouraging for beginners.
In other words, dropshipping comes with its opportunities and obstacles. Let’s start with the pros and then touch on the cons.
Pros
- Inventory. As a dropshipping entrepreneur, you don’t have to worry about inventory—the storing, packing and shipping is done for you by the supplier.
- Setup. Getting a dropshipping business up and running is relatively easy and quick. In most cases, it’s inexpensive and low-risk, which makes it appealing to people who are looking to launch a business with little overhead cost.
- Flexibility. Like any online venture, schedule and location are extremely flexible. Dropshipping can be done from anywhere in the world, and there are no fixed hours.
Cons
- Competition. Getting your foot in the door can be difficult as a beginner. Larger and more experienced companies usually have an established presence in niche markets. If you’re selling the same products for a higher price, you’ll lose some potential customers.
- Low profit margin. There are relatively low returns, especially upfront. Profit margins are typically between 15-20%, but you’ll have to factor in additional expenses on your end and price cuts for products in order to remain competitive.
- Disconnect between you and your customers. It’s very difficult to address customer complaints because you don’t have any control over the supply chain. If a buyer has an issue, you have little power to do anything but contact the supplier while reassuring the customer.
What It’s Like to Start a Dropshipping Business in 2022
Launching a dropshipping business requires certain elements in order to make it successful. Let’s take a look at what it’s like to start a dropshipping business in 2022.
Costs
There is a perception that it’s absolutely free to start a dropshipping business. While technically it is possible to launch your business using only free trials, the truth remains that you should invest at least a bit of money upfront if you want to see success in the long run.
According to Oberlo, you can prepare to invest around $63 your first month, and then $49 for the following months for a supplier subscription and a domain name. This is the recommended bare minimum to get you started, with more options you can add if you want. The costs are still relatively low, considering that the average brick-and-mortar boutique startup costs around $48,000.
Competition
As we mentioned earlier, competition between beginners and veteran dropshippers can leave the former feeling pretty discouraged. Larger companies usually take the biggest share of the market because they can offer the lowest price for any given product. It’s important to keep this in mind when starting your business.
Sourcing Products
If you’re new to dropshipping, it can be a challenge to find the right suppliers for your products. There are many to choose from, and deciding on the right one will depend on your specific goals and niche.
You can do research to compare suppliers and weigh the pros and cons of each option. It’s also important to do your research while choosing your products. Factors such as seasonality and popularity will play a role in whether your goods sell or not.
Marketing
There are some best practices when it comes to marketing your dropshipping business. The good news is that the best approach looks a lot like successful marketing for any e-commerce endeavor. In general, it’s a good idea to focus on the following:
- Find a target niche to hone in on.
- Create a website to drive traffic.
- Implement SEO best practices on your site.
- Create social media channels to showcase your products.
- Invest in high-quality product images.
- Join and be active in groups in your niche.
While a dropshipping business is relatively quick and simple to set up, you’ll still need to invest plenty of time, effort and resources if you want it to grow over time.
Is It Worth It to Start a Dropshipping Business in 2022?
As with any business venture, there’s a lot to take into consideration if you want to launch a dropshipping company. It’s an inexpensive, low-risk, and easy way to start a business anytime and from anywhere in the world.
With that being said, it’s important to consider the challenges as well. Time, competition, startup costs and marketing all play an important role in whether or not this kind of business model is for you.
Before you begin, ask yourself a few questions: Are you motivated to take on a new project? Are you relatively business savvy? Are you willing to put in the time needed to do thorough product and supplier research? If the answer to any of these questions is yes, then it may be worth your time to start a dropshipping business in 2022.
Conclusion
While launching a dropshipping business might not be the cake walk some claim it is, it can be a profitable way to earn money online with the right tools and information. Weighing the pros and cons, researching suppliers, and coming up with a killer marketing plan are all aspects of dropshipping, and it’s important to consider the steps you’ll have to take carefully before you begin. Ultimately, starting a dropshipping business is like anything else in life—you’ll get out what you put in.
Do you have any questions about how to launch a dropshipping business? Let us know in the comments section below!