Dropshipping Is Dropshipping Worth It? | LitExtension Review 2022
By LitExtension
Introduction
Low overhead budget. No product storage. Minimal risk. Is Dropshipping worth it?
With the presence of the COVID pandemic, dropshipping will become the preference of many store owners in 2022.
If you have the intention to start your own business, put dropshipping on the top of your list. Because this business model is the easiest way to kick off a new business. On the other hand, store owners have to acknowledge the upcoming challenges if choosing dropshipping. Is dropshipping worth it? Are the benefits of this business model outweigh the disadvantages? The blog will give you answers.
Helping you to know exactly is dropshipping worth it, LitExtension — #1 Shopping Cart Migration Expert also suggests how to approach this trendy business model in a strategic way. Plus, we list down everything you need to start a dropshipping business.
What Is Dropshipping?
Dropshipping is a retail business model in which you sell other people’s products and are in charge of other duties such as marketing and customer service. The most noticeable difference between dropshipping and other business models lies in who manages the inventory and who does not. Suppliers are the ones totally in charge.
The below picture summarizes how dropshipping works. Once receiving the orders from customers, the merchants will send order details to suppliers and let them take charge from there.
Regarding the potential of dropshipping, its market size had reached $128 billion in 2020 and will reach $200 billion by 2026. Additionally, around 30% of Amazon retailers are dropshippers. In the same report, Asia Pacific businessmen know for sure Is dropshipping worth it because this is the most prospective area for dropshipping.
Why Is Dropshipping Worth It?
Compared to the traditional model, dropshipping generates double profit. Nevertheless, it is not the only reason why more and more merchants adopt this business method.
Since the business model will involve the entire system of your business, there is only one time to choose it. Thus, if the store owners determine the business model wrongly, they have to waste a large amount of money.
The below three most noticeable advantages will help you to decide is dropshipping worth it.
Lean Operation
Lean operation is a must for any start-up. Because in the beginning, the business should focus on a high-level strategy and avoid unnecessary expenditures. When the dropshippers do not have to think about physical products, there is no need to spend money on the warehouse or the store’s physical presence. That’s why many successful businesses only start with a laptop at their own home. Compared to having traditional brick-and-mortar businesses, dropshipping is absolutely more budget-saving and helps the business to reach the break-even point more quickly.
Product Diversification
It will be more difficult for business owners to vary the product line before testing the customer demand when they choose the conventional business model start-up. In that case, the business owners are likely to be troubled with inventory management and face the unsold surplus. Thus, dropshipping allows the company to present to customers a vast array of products at the initial period.
Scalability
When the store receives a higher number of orders, expanding the business size is what must be done next. For the traditional retailers, if they want to scale the business up, there are hundreds of following problems such as hiring more storage space or recruiting more sales assistants. This requires much more effort to complete.
Scalability is absolutely easier with dropshipping as it nearly does not make any changes to the current situation of the business. Of course, there is more workload and spendings. However, it is inconsiderable compared to that of traditional businesses.
Three above features clearly demonstrate Is Dropshipping worth it. However, keep reading to make the final decision.
What Are The Challenges For Store Owners?
With a range of benefits mentioned above, dropshipping obviously becomes an attractive business model. This obstacle is heavier for those having a tight budget. However, it is of utmost importance for store owners to consider the downsides of this dropshipping format and determine whether they can pay the price.
High Competitiveness
Because it is too easy to start an online business with dropshipping, there are increasingly more and more to-be-online-merchants choosing this business model. Google Trends data reports the three-fold number of “dropshipping” searchings for the past 5 years. It proves the explosive growth of dropshipping interests and you’d better prepare to encounter high competitiveness.
“Many players in one playground” will make it harder for new merchants to find the dropshipping niches. Because nearly all segments and product lines are covered by the previous dropshippers. Thus, new merchants need to make significant efforts for brainstorming and market research in order to stand out in the crowd.
No Product Control
The product storing, packaging, and shipping are the responsibility of suppliers. Thus, dropshipping model gives no chance for you to approach the products and ensure their quality before customers receive them. Therefore, if there are any problems with products (over expiration date for example), your brand will be blamed for and shoulder every responsibility. Even the most experienced suppliers make mistakes, so this downside is unavoidable. You’d better have the preparation for it.
Though the product is the heart of every business, dropshipping nearly prevents you from product customization and quality enhancement. The products are designed and manufactured by suppliers, so you can not add in or eliminate any ingredients. The lack of product customization ability will restrict you from having any product unique selling points (USPs).
The Supplier Challenge
When you’re dropshipping, there is a high possibility that you will have a number of suppliers in order to get the best price and quality of stocks. As a result, there are multiple inventory sources and contacts you need to manage. Customers’ waiting time will be lengthened every time you check whether the products are available or out-of-stock.
Another challenge generated from the supplier is dropshipping prevents you from having the maximized profit. In order to boost the revenue, there are two main approaches: increase the price and reduce the production cost. Dropshippers only have the ability to interfere with the product pricing because suppliers have the total rights to their production process.
After reviewing both the upsides and downsides of dropshipping, try to determine and decide yourself is dropshipping worth it and is dropshipping profitable. Does its range of benefits deserve your effort to accept the upcoming challenges?
How To Make Your Dropshipping Store More Profitable?
After determining Is Dropshipping worth it, it’s time to maximize its benefits.
The picture below sketches six main steps to start your own dropshipping business.
Based on this 6-step process, we pick out the most challenging stages and recommend several tactics that store owners should adopt in order to quickly increase the revenue.
Mastering Your Marketing
Since dropshipping allows you to exclude physical stores in the budget plan, your online presence will decide the revenue. In the beginning, one of the first problems that dropshipping merchants deal with is the lack of traffic to their website. The problem may last about the first 6–12 months when customers do not know who you are so you will mostly invest spendings and effort in Marketing at this time.
Automate Your eCommerce Store
Several eCommerce platforms allow the store to automatically proceed, but if yours does not, don’t worry. There are a number of user-friendly dropshipping plugins which automate your business operations. These plugins help you to automatically process the customer orders (by checking the inventory situation, confirming that customers have ordered successfully, and sending the estimated shipping time to customers.
Focus On Customer Service
As mentioned above, it is hard to find the USPs in your product. However, since you’re totally responsible for the entire customer care, try to maximize its efficiency. Being available 24/7, or customized service can become the highlights of your store, which make customers choose you over other competitors.
Best Platforms For Dropshipping
Choosing the most suitable platform is listed as one of the decisive factors of dropshipping. There are several aspects to consider when shortlisting the eCommerce platforms. However, this article will analyze the platform types (open-source and hosted) to give you an overall insight.
Hosted Platforms
Firstly, if you do not possess any technical knowledge, a hosted platform is perfect to use. These platforms only require you to “drag and drop” in order to design a website from scratch. Here are several recommendations for this type of platform:
Shopify
Shopify ranked first in the popularity of hosted platforms. It is also reported as the most common dropshipping platform, with 1.9 million products in 2021.
From the beginning to the optimizing stages, Shopify creates an effortless experience for users. There is no need to access the back-end and write source code for your store in Shopify.
Apart from having no technical hassles for users, Shopify is well-known for its excellent customer service. If you meet any difficulties in building your store, you can not only look for advice in the huge community but also seek help from the 24/7 customer support team of Shopify.
On the other hand, using Shopify may let you suffer from the lack of customizability, as you have to mostly rely on their available templates. Plus, in terms of SEO optimization, open-source platforms outweigh Shopify even though Shopify’s marketplace has many great SEO plugins.
You can check out our video to quickly capture the pros and cons of Shopify:
BigCommerce
Another commonly-used hosted platform is BigCommerce.
BigCommerce gives you every opportunity to improve better your SEO performance. You can change the page titles, meta descriptions, and alt tags. The platform also helps to extract and generate important keywords from the information you enter into your product pages. When you change the name of a product, it generates 301 redirects automatically. Remarkably, BigCommerce SEO includes its own built-in analytics. It provides you with the statistics you need to track your SEO performance.
This platform, like Shopify, includes an abandoned cart recovery feature that lets you send three automated emails to entice shoppers to return to their purchase. You may also personalize your email, send it more frequently, and include discount codes. This capability, however, is not available with the Standard plan.
Although this website builder does not have an email marketing feature by default, BigCommerce interfaces with various email marketing platforms, including Constant Contact, iContact, Mailchimp, and Interspire.
Open-source Platforms
Secondly, if customization is on the top of your list, the open-source type is better for your store. Nevertheless, you need technical expertise to self-edit the back-end code, which means you have the total ability to design and functionalize the website. WooCommerce and Magento are mostly-mentioned examples of the open-source type.
Magento
Open Source and Magento Commerce are the two versions available. Magento’s two editions are vastly different. Magento Open Source is a free edition for store owners that have a limited budget. Magento Commerce (formerly known as Magento Enterprise) is the premium version with more sophisticated features and outstanding customer support. If you are wondering about the cost of these two versions, check out our detailed article about Magento pricing.
Magento is a feature-rich platform, but it is not for the newbies. Magento is a wonderful platform to work with if you already have technical skills. Thus, if you are still finding the answers to Is Dropshipping worth it, it is not ideal to spend time on Magento.
WooCommerce
WooCommerce is a free WordPress plugin that turns your WordPress website into an online store by adding eCommerce features. This platform is now the most popular in the market, with 30 percent of online shops using it as of October 2020. As a result, there are various specialist communities on this site where you may get solutions to technical questions.
WooCommerce, like Magento, is an open-source platform — which means it is completely adaptable and configurable. One of its advantages over Magento is that it is far more user-friendly, particularly for individuals who are already familiar with WordPress.
Discover WooCommerce pricing and a WooCommerce setup tutorial to determine whether this platform is for you.
We also provide an insightful article about WooCommerce dropping plugins review and a detailed guide to set up WooCommerce for you. Don’t forget to check it out.
FAQ
1. Is dropshipping worth it?
Absolutely yes. If you choose the right niche, implement a proper marketing strategy and constantly improve your customer support, dropshipping will be the most profitable business model to run.
2. Is dropshipping legal?
Totally yes. Dropshipping is legal. However, you have to choose legit suppliers to ensure the products’ quality. Besides, don’t forget to check the law in several nations or states in which you are not allowed to trade certain types of products.
3. How much do dropshippers make?
A dropshipper can earn up to 20–30% margin of the sold products. So, they will get $1000-$5000 per month after paying all of the necessary marketing or website operation costs.
4. Is dropshipping dead?
The answer is no. In fact, dropshipping is a thriving business model with low investment and high profit.
Summary
There is no doubt that dropshipping gives a stress-free experience for anyone who wants to start their business in 2022. Providing dropshipping’s most-updated information, the article also covers the very first steps that merchants should pay attention to. Hope that after reading this, you can decide is dropshipping worth it or not. Let’s start your business right in 2022!
The article also provides essential information on how to choose the eCommerce platform. This is which is the first and foremost step of dropshippers. If you are currently using an eCommerce platform and realize it is unsuitable, let the experts from LitExtension — the #1 Shopping Cart Migration Service give you advice. With 160,000+ successful migrations for 60,000+ worldwide customers, LitExtension can transfer all your data including products, customers’ orders automatically, quickly, and accurately, especially, with no technical skills required.
