Is Dropshipping Profitable? – How To Make It Work in 2021
As the world of e-commerce booms due to the effects of the COVID-19 pandemic, one business model stands out in particular: dropshipping. Dropshipping is a quick and reliable order fulfilment model that can help your business grow very quickly if done right. In fact, if you are successfully dropshipping your products to customers without any incident, you might be able to cut down on a lot of costs. But….Is dropshipping profitable nowadays?
Of course, drop-ship is by no means an easy order fulfilment method, as there are still plenty of aspects to consider when you run a dropshipping website. However, is it a profitable business? The answer is a definite yes! With the right management, your eCommerce business will boom in just a short period of time.
What is dropshipping?
Dropshipping is a new order fulfilment method that has recently received plenty of buzzes. With this method, you don’t actually need to keep the products you are selling in stock. Owners of a dropshipping business will buy products from a third party instead and ship these products instead. Thus, a dropshipping company does not handle the products directly, eliminating the need for a brick-and-mortar shop.
The biggest advantage of dropshipping is the fact that you do not have to keep a close eye on the manufacturing process, since there has already been a third-party manufacturer who takes care of it for you. For this reason, you will have much more time handling customers’ requests and other matters.
Is Dropshipping Profitable? The truths about dropshipping
Before you start a dropshipping business, there are several facts, no matter how inconvenient, you have to take in:
- The profit margin will be quite tiny in the first months: An online store that employs dropshipping might have to cut down on their selling prices in the early days on their website in order to attract customers. If there is no traffic to the site, dropshipping businesses will not be able to survive.
- The competition will be very tight: Not only will you have to compete with retailers but you might also face fierce competition from other dropshipper as well.
- You have very little control over the supply chain: In traditional business models, you will be the one in charge of producing the products and then selling them to your customers. However, with dropshipping, you will not be able to control the manufacturing process. This means that it will be quite hard for you to deal with customers in case of faulty products.
Is it still profitable to start a dropshipped service?
In spite of the many difficulties faced by dropshipping business, the sector is still booming with opportunities. In the year 2021, the overall profit for eCommerce and dropshipping has surpassed $4 billion, and there is still no sign of the trend slowing down.
Even Google agrees that dropshipping is still very much alive and well. On Google Trends, the term “dropshipping” has recently peaked 100% (the highest possible value) in interest over time, so it is safe to assume that this business model still piques the interest of many customers and would-be entrepreneurs.
As dropshipping businesses sell products without having to manufacture them, this business model is a low-risk one that will ensure you will make profits. It is considerably easier to start a dropshipping business, as opposed to a retail business, which requires a lot of capital.
Even though drop shipping is still a profitable model, one should keep in mind that it is by no means a hands-free line of work. It involves quite a lot of management and even business savviness to keep it afloat. If you need help maintaining your dropshipping business, here are some valuable tips you might want to consider.
Focus on the customers
The most important persons in your dropshipping business are your customers. If the customers are not happy, they will leave angry reviews and demand refunds or returns. This will be an absolute nightmare to process since you have to work with your third-party provider. For this reason, customer service and customer support will have to be your first priority. Treat your customers with respect and listen to their issues. Try to do whatever you can to help them resolve their problems. They might end up giving your business a glowing review, which will help you to stand out from a saturated crowd.
Work closely with your dropship supplier
It is not unusual for a dropshipping business to fail because of faulty products and failure to help customers refund or return their products. This will have an adverse effect on your business, as you will slowly lose customers due to bad reviews. Even if you do not have to supervise the manufacturing process, it is important to be in close contact with your third-party supplier from whom you buy products. This will make sure every problem is resolved as swiftly as possible. If you could get your dropship supplier to charge you with wholesale pricing, then it is going to be another big plus!
Make your brand unique
With so many dropshipping businesses out there on the market, it is essential that you should make your brand stand out from the crowd. Do not neglect the marketing and the branding steps, as they will be the most important tools to help you boost the traffic to your site as well as to make your brand unique. If possible, you could consider choosing a smart website design to leave a good impression on the visitors.
Watch for legal ramifications
It should be noted that dropshipping is legal in the US, as it simply is another business model. Big e-commerce platforms such as Amazon and eBay allow dropshipping as an order fulfilment method. So you usually will not have to worry about legal issues. That said if you plan to go international with your dropshipping business, consider doing some preliminary legal research beforehand; every country has its own law regarding business practices. If dropshipping is not a legal order fulfilment method in your destination country, the products might be put on hold by customs. For that reason, do not skip the preliminary research before jumping into a new market.
Problems that a drop shipper might face in 2021
2021 is an uncertain year, as the course of the COVID-19 pandemic still has not shown many signs of alleviation. However, if 2020 is of any indication, e-commerce will still be on a healthy growth path. Here are some issues that a dropshipping business might have to face in the year 2021.
- Shipping delays: Since 2020, shipping has been a huge issue for all businesses. Shipping in 2021 might not be better since the global situation has not improved much. You might want to extend the shipping time a little bit further to combat the issue.
- Returns and refunds: As e-commerce booms, so will the number of returns and refunds. These orders can be quite tricky to handle, as you will have to work directly with your manufacturers to ensure that the returns and refunds are processed.
Is Dropshipping Profitable Summary
In summary, dropshipping is still a profitable business model, even if it is a bit saturated. The profit margin might be tiny in the first few months. As you develop healthy traffic to your website, the profit margin will steadily increase over time. Dropshipping also requires commitment since it is definitely not a laissez-faire model where you can leave everything to run by itself. You will have to work closely with your suppliers or your advertising experts in order for your business to stand out and to flourish. It might start slow, but dropshipping will be well worth the investment.
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