Since online shopping, dropshipping has grown in popularity and profitability like never before. The industry is expected to reach $557.9 billion by 2025, which is more than double the $262.3 billion it was worth in 2020.
It’s simple, convenient, low-risk, and perfect for those looking to start an online store without any overhead costs. Who wouldn’t want to start a quick business in the comfort of your home and not worry about choosing the right product to sell?
However, there is no such thing as a free lunch. Still, there are some considerations of dropshipping that you should be aware of if you plan on investing in this business.
In this article, we’ll discuss the pros and cons of dropshipping in depth so that you can make an informed decision about whether or not it’s the right business model for you.
Dropshipping Pros: What Makes Dropshipping an Appealing Business
Running a dropshipping business is just like running an eCommerce store– except you only mediate the transaction between the customer and the factory supplier for a profit.
Here are some reasons why some people opt for a dropshipping business.
1) Low Start-Up Costs
Dropshipping is a great business model for those with a limited budget. Since you don’t have to carry any inventory, you can start your business with very little money and start quickly.
No need to make big product purchases, no need to rent an office. All you need is a domain name and hosting for your website, and you can be up and running in no time.
You can use WooCommerce to build and manage your dropshipping website. They have robust plugins that allow you to import products from AliExpress or other suppliers to your WooCommerce website instantly, such as:
- AliDropship (AliExpress products)
- Wholesale2b (US-based suppliers)
- Spocket (US & EU-based dropshipping suppliers)
- DropShipMe (AliExpress products)
- DSTitan (AliExpress, Banggood and DHgate).
See more best supplier and WooCommerce plugins:
2) Easy to Set Up
Another advantage of dropshipping is that it’s very easy to set up. Using eCommerce website builders like WooCommerce, you can create a professional-looking website in just minutes, upload dropshipping products from your supplier, and write catchy but detailed product descriptions.
There’s no need to purchase any inventory upfront. This makes dropshipping an ideal business model for those who want to start an online business quickly and with minimal effort.
3) Flexible Location
Dropshipping is a great business model for those who want to work from anywhere in the world. Again, since you don’t have to carry any inventory, you can run your business from anywhere with an internet connection.
This makes dropshipping a perfect option for entrepreneurs who want the freedom to work from home, or from anywhere in the world.
4) No Inventory Management and Fees
A customer orders a product from your store at your retail price, and the order is automatically sent to your supplier, who will then ship the product directly to your customer. This means that you don’t have to worry about managing inventory.
Since you don’t own or even see the products you sell, there’s no need to deal with inventory storage fees. And when you don’t have to invest in inventory upfront, you can keep more of the revenue that you generate.
5) Easy to Scale
Dropshipping is also a very scalable business model. This is because there are no inventory costs, so you can easily add new products to your store or even alter your whole product lineup without worrying about storage space or extra costs.
This makes dropshipping an ideal option for those who want to grow their passive income source.
Dropshipping Cons: The Pitfalls You Should Be Aware Of
However, there are some challenges that you should be aware of if you plan on starting a dropshipping business in 2023
1) Fierce Competition
The biggest disadvantage of dropshipping is the competition. Because dropshipping is such a popular and low-risk business model, many people are trying to do it.
Everyone can easily run a dropshipping business. And this means that you’ll need to put in some extra effort to make your store stand out from the rest and build customer trust.
You can opt for social media to boost your dropshipping awareness. Use Instagram or TikTok marketing to grab a younger audience’s attention. Meanwhile, Facebook and LinkedIn are better options for promoting your dropshipping business for professionals or older generations.
2) Margin Squeeze
When you have to stay afloat in a sea that’s full of dropshipping stores, it can be difficult to achieve high-profit margins. You have to compete with other dropshippers who are selling the same products.
To overcome this, you’ll need to find a niche market with less competition, or offer unique products that can’t be found easily.
3) Reliance on Suppliers
Dropshipping means that you’re reliant on your suppliers. This means that you have less control over the products you sell. If your supplier is out of stock, or if there are delays in shipping. Or, if your supplier makes a mistake, it can reflect poorly on your business.
To reduce this risk, you should work with multiple suppliers, so that you can switch to a different supplier if one of them makes a mistake.
4) High Shipping Costs
Another potential downside of dropshipping is that shipping costs can eat into your profits. This is because you’re selling products that need to be shipped, so you have to factor in shipping costs when calculating your prices.
To overcome this, you can offer free shipping. This will make your store more attractive to customers, and it will also increase the average order value. Or, if you can’t afford it, you can charge your customers a flat rate shipping fee.
5) Complicated Returns and Refunds Policies
Dropshipping, or eCommerce, in general, is so much more about giving the customers the product they order.
You also have to deal with returns and refunds. This is because customers can change their minds after they’ve received a product, and they might want to return it.
In this case, you can offer a clear return or refund policy, or you can offer a satisfaction guarantee.
Is Dropshipping Business Worth It in 2023?
Now that we’ve looked at some pros and cons, the burning question would be: is dropshipping still a viable business in 2023?
The answer is YES.
Every business has its pros and cons. But, looking at constantly-staggering numbers in the recent statistics, dropshipping is still very much alive in 2023. Right now you can start your new business with AliDropship.
While you’re at it, don’t forget to check out YayMail Addon for AliDropship WooCommerce Plugin.
It’s a worth-investing in when you’re looking for a hassle-free way to make a passive income.