Dropshipping has long been praised as a successful side business concept. People have referred to it as an easy passive revenue stream because sellers aren’t required to produce, store, manage inventory or handle shipments any things. Anyone can enter the eCommerce industry thanks to the accessibility and simplicity of this business model, and selling a range of products via dropshipping is now simpler. It is incredibly user-friendly and compatible with several dropshipping apps, for starters. Additionally, it includes several capabilities that let you do much more than sell things. For example, you can pay bills, monitor shipments, market your business, create an abandoned-cart strategy, and access data.
However, if you want to earn a profit in a short period, dropshipping is not the best move. Because it has some downsides that one should consider before taking the plunge. In this post, we will discuss the downside of the Shopify dropship app.
Is Dropshipping Beneficial for an entrepreneur?
Dropshipping is probably not the best course of action if you want to make a lot of money quickly. However, It can pay off for you and grow into a fantastic side business or more if you have the time and money to commit in the beginning. Dropshipping is a method of order fulfillment whereby online retailers don’t store or ship the goods they offer. Instead, when they make a new online sale, they get in touch with their product provider (a manufacturer or wholesaler), and the order is dispatched from the supplier to the client.
Why is there a need to rethink about Dropshipping business?
Dropshipping has benefits, but there are also a number of drawbacks that you should carefully examine before you start. Dropshipping is not a simple or risk-free process. Below we have discussed the primary arguments against the dropshipping business model.
Dropshipping is not an Easy Task.
Whether you ship your own products or not, running an online business is not easy. You are in charge of handling payment processing, dealing with customer service concerns, updating your website, and drawing attention to your product line.
If you are unfamiliar with web design or SEO, this might take a lot of effort and be challenging. Before you start, make sure you understand business, customer support, and eCommerce technology. If you don’t fit that description, think about starting with an intuitive eCommerce platform that supports dropshipping.
Dropshipping Provides Negligible Profit Margins
While dropshipping could be the most practical way to complete orders, it is surely not the most profitable. Yes, a wholesaler will be the one providing you with the goods. However, you won’t obtain the best prices for your online store because you won’t be purchasing goods in bulk but rather one at a time as your consumers place orders.
Additionally, the wholesaler will charge extra fees for the picking, packing, and shipping of each customer order, which will negatively impact your profit margin. The typical profit margin for dropshippers is between 10% and 15%. The lowest profit margins are often achieved by high-ticket items, whereas better margins are achieved by lower-cost extra products.
Competitive Dropshipping Business
Even inside your niche, there will be a tremendous amount of rivalry because the entry barrier is so low. Many of your rivals may approach selling at the lowest price feasible, which may affect your profit margins.
To succeed, you must locate a dropshipping market with few rivals and distinguish your product listings with thorough descriptions. One can use the information of the Shopify dropshipping app. It provides a good webinar on dropshipping business for its users.
Forfeit Control over the Quality
Your products will go directly to your clients without ever touching your hands because you effectively outsource warehousing and fulfilment to your dropshipping suppliers. Convenience-wise, that is fantastic, but quality control-wise, not so much.
To ensure that the products are of the calibre your customers demand, you won’t be able to inspect them. Perhaps more significantly, shipping will not be your responsibility. Your supplier is responsible for shipping goods on schedule, but your customers will hold you accountable for any substandard goods or delayed deliveries (and, by choosing to dropship, you assume this responsibility). So, we will recommend you develop your custom Shopify dropship app to get rid of all the hassle.
Product Returns are Common
The unfortunate truth of eCommerce returns. The average online return rate for 2021 was 20.8 percent, which was consistent with prior years. The highest rates were seen for fashion and health/beauty products. You can see higher-than-average return rates due to the potential instability of dropshipping suppliers.
You shouldn’t rely on it, but some vendors are prepared to accept defective goods back (and may even pay for return shipping). If your customer is unhappy with your product, you might need to buy a replacement for them and pay for delivery out of your own cash.
When you decide to build your company on a dropshipping model, shipping costs can pile up rapidly. Especially if you stock your store with products from various dropshipping suppliers.
Consider dropshipping apparel as an example. You might fill your products with stock from three different suppliers. You will have to pay for each shipment separately rather than just bundling those things together if one buyer orders a t-shirt from each of those three vendors.
It can result in dramatically increased transportation costs, and it can be challenging to find a means to offset those extra prices. Passing on that cost to your consumer is not a good idea because it will probably result in cart abandonment since shipping is so expensive. Paying separate shipping for three different things is also not a smart move. In general, if you intend to dropship, keep your list of suppliers small and look for vendors who provide a variety of goods under one roof.
Inventory is not Secure in Dropshipping.
The stock of your suppliers affects your ability to complete customer orders. You can wind up selling items that aren’t even available if their stock levels abruptly plummeted dramatically and you weren’t aware of it. That will only result in very disgruntled customers. Most of this problem is solved by the real-time stock level access provided by some suppliers’ APIs.
Issue of Supply chain
The inventory is frequently present, but shipping an item to a consumer is a challenge. Several factors can cause items to be delayed at domestic warehouses and international customs checks:
- insufficient workers to process and deliver the goods
- increasing criteria and limitations for international shipping
- In general, there are fewer shipping vehicles on the ground, in the water, and in the air as a result of efforts to reduce shipping emissions.
Customers expect quick and easy shipment, especially in a world where Amazon rules. Without the support of a major shipping company, dropshippers might not be able to promise that kind of hassle-free delivery.
Hence, we have discussed the downside of dropshipping business. So, if you want to lean towards the dropshipping business, one can get an app for their traditional eCommerce business. But before starting the business, the merchant should have a platform that is easy to use and allows to sell multiple products including the inventory and shipping management tools.