As you already know, in recent years, many online businesses have been closely linked to the dropshipping business model, using it as a way to help them grow and become more profitable. What's very attractive to many dropshipping entrepreneurs, is that it allows companies to operate without the need to hold inventory, own a warehouse or even pack and d & # 39; Ship the products themselves.
This happens because in this scenario, the company teams up with a dropshipping supplier who can both manufacture and store the products in his own warehouse. Apart from this, the company can never see the product since the dropshipping supplier also takes care of the appearance of the packaging and shipping of the transaction.
The attractiveness and profitability of this business model, if it's properly implemented, are huge – that's why many large retailers, such as Ebay and Amazon, have stepped in and have reaped the benefits of recent years.
The ups and downs of dropshipping
As attractive as it may sound, the dropshipping business model has many disadvantages. For beginners, one of the most important drawbacks is the very appearance that makes it equally appealing: you will be relinquishing central retail areas to your dropshipping provider. This means that you have no control over how the items are packaged and in what state they are sent to the customer.
Apart from that, you depend entirely on the commercial viability of your supplier. If they fail as a business and yours is exclusively related to their business, the fall will be difficult and frustrating.
Another thing to take into consideration is the fact that with dropshipping, you will get higher prices than wholesale prices, since the supplier has to take into account key costs such as the costs. warehousing and software, staffing costs, inventory costs and insurance costs, among others. Given this, it is essential to remember that competition will be strong, especially from large retailers who buy wholesale.
Breaking Real Costs
In terms of costs, it is true that a dropshipping business model can be implemented on almost zero capital, especially compared to other business models. However, as your business grows, the costs are likely to increase. Let's break down the basic costs that every dropshipper incurs in their business.
First of all, you will need to set up a website, and a good website from elsewhere, because it will be the forefront of your business, as well as the point of departure of all your orders. To this end, going with Shopify for a basic website plan will make you spend $ 29 a month, while Bluehost will also charge you a monthly fee of $ 2.95 for a domain.
If you get to this point, you will also undoubtedly need a dropshipping automation app, like Oberlo, which comes at a monthly fee of $ 29.90. Aside from that, you may also want to invest in a currency locator at an annual fee of $ 9.99, as well as in a tax calculation and reporting application, such as Taxify at $ 47 a month.
Go professional with your company Dropshipping
If you really want to move your dropshipping business to the next level, you can also invest in the Trust app, which offers free trust seals and notification generation tools for a monthly fee of $ 39.99.
In addition, you will want to be interested in promoting your website and products, so MailChimp would be a good start for your $ 10 per month newsletter campaign. All other promotional costs, such as social media advertising campaigns, vary according to your budget and needs.
Of course, you will also need to support IT, web design and variable content costs for your website, cross-border taxes, and payment processing fees.
In terms of dropshipping, entrepreneurs should also be aware that their profit margin will not reach 30%, as is the case with large retailers, but will remain more in line by 15%, they are lucky.
Is Dropshipping still viable?
In the end, dropshipping is both easy and difficult to support and implement. On the one hand, it allows you to manage the business from anywhere, at relatively low cost, which allows you to avoid being involved in a practical way, while on the other hand, it involves many risks, many of which are the result of you handing over key operations to your supplier.
However, as long as you manage to find a reliable vendor, identify an important niche, consider all the facts and be prepared to treat it as a real business, dropshipping is definitely a business model that can be just as successful in 2018 as has been the case in recent years.
Author : The main goal of Philip Piletic is the fusion of technology, small business and the marketing. He is a writer, writer, marketing consultant and guest author on several authority websites. In love with startups, the latest technology trends and helping others to realize their ideas. He thanks shopify specialists for their help with this article.