Hey all, it’s Matt from Style Factory here, the go-to site for advice on ecommerce and growing an online business. In this video I’m going to explain what dropshipping is, its pros and cons, and the tools you’ll need to do it. So stay tuned to end and find out if dropshipping is the right business model for you.
But before I dive in, I’d like to invite you to like this video, subscribe to our channel and hit the notifications bell. This will give you easy access to all our ecommerce resources. Ok, so let’s start things off with a simple definition of dropshipping. Dropshipping is a business model where you don’t manufacture, purchase, store or deliver any products.
Instead, you take orders for products via an online store, and pass them onto a supplier. The supplier then charges you for the order, and sends the goods to the customer. This sounds like an easy, stress-free way to do business — but there are some important pros and cons to consider.
Let’s walk through the key ones now, starting with the advantages of dropshipping. 1. Dropshipping doesn’t require much startup capital. The main advantage of dropshipping is that you don’t need much cash to start doing it. When you dropship, you become a ‘middle man’: you mark up on products that you never buy, stock or deliver.
Because you don’t have to spend a lot of money on inventory that you might never successfully sell, dropshipping is ultimately a low-cost, low-risk way to start a business. 2. Ongoing running costs are low. In addition to providing a low-cost way to start a business, dropshipping also lets you run a business cheaply.
It doesn’t require you to pay for storage space or staff; you can technically run the business yourself using just a laptop and some fairly cheap software. 3. You can sell a wide range of products. With dropshipping, there are no limits placed on what you can sell online. A lot of dropshipping companies are available that can supply a huge number of products — meaning that you have a lot of flexibility regarding the niche you want to dropship in, and can offer your customers an extensive range of products.
4. You can run your business from anywhere. A dropshipping business doesn’t tie you down – so long as you have an Internet connection and a computer, you can run it from anywhere. 5. It’s not labour intensive. Unlike a business that involves selling your own products, dropshipping is not labour intensive.
You don’t need to worry about sourcing warehouse space; packaging goods; shipping products; dealing with product returns; or inventory management. 6. It’s easy to scale. In order to scale certain types of online businesses, you need to invest heavily in staff, systems and inventory — and sometimes change your operations in radical ways to ensure continued growth.
This is not really the case with dropshipping — aside from investing in marketing, you don’t need to spend much or change much to grow this type of ecommerce business. Most of a dropshipping business’ infrastructure can more or less stay as it is — it’s just a case of putting more orders through it.
7. It’s easy to experiment with. Because setting up a dropshipping business is fairly risk-free, you get a lot of freedom to experiment and try things out. Changing your online store’s branding and product ranges doesn’t have to involve much of a time or cash investment. So, as you can see from the long list of advantages associated with it, dropshipping can be a very attractive business model.
But it shouldn’t be viewed as a get-rich-quick scheme — it can be tricky to do dropshipping right, and there are some key ‘cons’ to consider as well as pros. So, let’s take a look at the reasons why dropshipping might not be for you. 1. The profit margins can be low. Because dropshipping is a low-cost, low-risk business model, the barriers to entry are low.
This means that you will find a lot of other entrepreneurs entering the dropshipping space, marketing the exact same products as you, and competing hard on price. 2. It’s hard to ensure that dropshipped products are ethically produced. The advantage of making your own products, or sourcing them locally to stock and sell, is that you can gain a clear understanding of who made them and how.
With dropshipping however, you’re often completely in the dark about the working conditions in which your goods were made, and many dropshipping suppliers are based in countries that don’t have a great record when it comes to working conditions and forced labour. 3. You have limited control over the appearance and branding of your goods.
With most dropshipped products, you have little or no control over their appearance: you are generally dealing with ‘off the shelf’ items. So, if having a product range featuring your own brand is important to you, then dropshipping is not necessarily the best approach. 4. Suppliers can be unreliable.
With dropshipping, you’re often relying on suppliers that you don’t have a personal connection with, and that you can’t extensively vet. Sometimes this can lead to issues with product quality, poor communication, items going missing and low-quality packaging. And all this can result in unhappy customers.
5. Managing multiple suppliers can get complicated. If you’re working with multiple suppliers for your dropshipping business, you can end up with quite a complicated supply chain. Different suppliers may have different operational structures in place for shipping and billing — and all this can add up to some tricky admin work.
6. Providing customer service can be challenging. When things go wrong with a dropshipping order, providing good customer service can prove challenging. This is because to sort out any problems, you’ll often need the help of a third-party supplier that you don’t know well and who may be located on the other side of the planet.
This may lead to a long wait for your customer to get their problem solved — and they will be puzzled as to why you, as the store owner, can’t simply resolve the issue or arrange a new delivery of a product yourself. 7. Shipping costs can be high. Depending on where your customer base and suppliers are located, you may face quite high shipping costs on your products.
For example, a lot of dropshipping suppliers are based in China, and if the bulk of your customers are based in the US, they — or you! — will have to pay quite a lot of money to get their products delivered to them. Ok, so those were the key pros and cons of dropshipping. But how do you actually do it? To start dropshipping, you’ll need three key things: an online store building tool, a dropshipping app and an online advertising platform.
Let’s look at each of these in turn. An online store builder As its name suggests, an online store builder lets you build a website that sells stuff! Popular online store builders include Shopify, BigCommerce, Squarespace and Wix; of these we feel that Shopify and BigCommerce give you access to the most comprehensive range of dropshipping features.
Shopify is an ecommerce store builder that is particularly well suited to dropshipping. Unlike competing platforms, it makes a free dropshipping starter kit available to its users that contains a 14 day trial of Shopify, dropshipping course and other training resources. You’ll find a link to this in the video description.
A dropshipping app In addition to an online store builder, you’ll need a dropshipping app to connect your store to a dropshipping supplier. Once installed, this will let you select products from a supplier’s inventory, list the relevant products on your site, accept orders for them and pass the orders onto your supplier for fulfilment.
You’ll find dropshipping apps in the app store of your chosen online store builder, with popular ones including DSers; Modalyst; Spocket, Printful and Printify. An online online advertising platform New dropshipping stores are highly unlikely to perform well in organic search results — getting a new site to rank highly involves quite a lot of SEO work.
So, in order to get a dropshipping business off the ground quickly, you usually need to invest in online advertising. Typically this involves search engine marketing and social media advertising — with Google being the obvious platform choice for search engine marketing, and Facebook and Instagram being the obvious choices for social ads.
And that’s all the key things you need to know about getting started with dropshipping. But there’s lots more to learn about how to run a successful dropshipping business. So make sure you check out the full Style Factory guide to dropshipping — there’s a link to this and other dropshipping resources in the video description.
To get more ecommerce tips, do make sure to subscribe to our channel and hit the notifications bell. And finally, if you have any questions about dropshipping, do leave them in a comment. We read them all and will do our best to help.