Over the last few weeks, I’ve been researching a possible new business opportunity, drop shipping.
To be honest I use to think drop shipping was a scam but the thing is that could be further from the truth. The problem there are a million ways to skin a cat and some methods of drop shipping are not the best.
This is why it always pays to do your research before you just jump into any side hustle only to find out you bought some phony course that drained your bank account.
To help you out I’m going to share the pros and cons I learned about drop shipping to help you make a better-informed decision and figure out is dropshipping worth it?
BTW – If you have any further questions that I didn’t answer in this post just let me know in the comments below and I will try to help and address them.
With that said let’s get started…
Pro: Cheap to Get Started
To start it’s incredibly cheap to get started with drop shipping. All you need is a product to sell, a website, and a little advertising and you’ll be up and running.
Ok maybe I made that sound a little easier than it really is, so let me break it down for you a little more.
- The Website – I prefer Shopify since it’s built for those who what to start an eCommerce business. More on this later. Total cost: $29 a month.
- The Product – As a drop shipper you only need to a buy a product when someone buys it from you.
- Advertising – The final piece of the puzzle is advertising your products online. The great part about this is that you can usually get your first $100 of ad spend for from Google for free.
In the end, your initial cost is very low but as you grow your business you’ll spend more but as you spend more you should hopefully be earning more.
Con: You Only Earn 20% to 30% of Total Sales
One negative that really held me back from pulling the trigger on starting a drop shipping business is that you only earn between 20% to 30% of the entire sale.
This is a hard pill to swallow when you can make nearly the same amount of money doing something like affiliate marketing and not have to deal with half the issues that drop shipping has.
For example, if you own a drop shipping store and someone orders a product from your online store you are responsible for ordering that product from your wholesaler. On top of that if they return the product you’ll be in charge of processing that as well.
On the other hand, if you are selling a product as an affiliate and someone buys a product from you, they are responsible for shipping the product, processing any returns, and paying you the commission.
When it comes down to it most affiliate programs pay anywhere from 4% to 50%. If you can earn that much of the sale and do less work, why not just become an affiliate instead.
Pro: Shopify Platform
Starting your own eCommerce business years ago was extremely hard. You needed a good website, which required you to hire a web designer. The site also needed to be very secure to prevent hackers from breaking into it.
In the end, you likely had to piece together two or three programs to get your business up and running.
Today, starting an eCommerce business is much easier because of one simple tool, Shopify. Shopify is a full on eCommerce solution that does all the hard work for you so you can focus on the more important things in your business.
Here are a few of the things you get when you sign up with Shopify.
- Unlimited bandwidth hosting that will handle as many visitors as you can throw at it.
- Done for You Payment Processing that allows you to accept credit card payments on your site.
- Fully Customizable Website that lets you design your website exactly how you want with no coding.
When it comes down to it Shopify is the go to platform for starting your drop shipping business. You can start your free 14 day trial of Shopify now by clicking here.
Side Note: I am an affiliate of the Shopify program and any purchase you make of this product through my affiliate link will earn me a commission that supports this site.
Con: You Need to Find the Right Suppliers
One of the toughest parts of starting a drop shipping business is finding the right suppliers to deal with. Having the right suppliers can mean the difference between success and failure.
The thing is you just can’t go with any supplier. You need the right supplier that meets a few criteria in order to work with them.
So here are a few tips to consider.
MAP Policies – First off a good supplier will enforce something known as Minimum Advertising Price policies (MAP). This means that the wholesaler has set the lowest price they will accept for you to sell their product thus eliminating the cut throat pricing wars.
Subscription Wholesalers – Second you’ll want to stay away from subscription wholesalers who are basically middle men. A good example of this is Doba. The problem with services like this is that they eat too much of your profit margin, and you should never have to pay a fee to work with wholesaler Instead, you’ll want to work directly with the wholesalers themselves.
Contact Them in Person – To have the best chance of getting a wholesaler to work with you, you’ll want to contact them in person over the phone. I know a lot of people today like to email people which can work but if you want the best chance you’ll want to contact them over the phone.
Set Your Site Up – Finally, the last tip is to set your drop shipping site up before you contact your wholesalers. The reason for this because your wholesalers like to see what your site looks like before they decide to work with you.
Pro: 1 to 2 Weeks Before Your First Sale
Another big benefit is that once you have your Shopify site setup, found your suppliers, and have a few ads running you can expect to start receiving your first sales in a week or two typically.
Side Note: I’m not making any income claims or guarantees here. The result will vary for everyone.
When you look at other ways to earn a buck online drop shipping can get up and earning income faster if you’re starting from scratch.
As an example, I started promoting the Teachable affiliate program back in late December last year. It took me nearly 6 months to earn my first commission with this program. The reason being is because I can’t just run a bunch of ads to my affiliate page due to restrictions and guidelines of the affiliate program.
Con: No Control Over Products In Stock
When it comes to drop shipping there is one thing you don’t have control of, the product. If someone comes to your site and orders a product from you there is a chance that it could be out of stock.
This can be because the product is in high demand or that it’s is going out of stock. So how do you deal with this issue?
You work with multiple suppliers.
When you work with several suppliers that all sell the same product you run less of a chance that you’ll run out of product to sell. This can mean more work but the last thing you want to do is let a customer down. After all, trust is the most important currency on the web.
Pro: You Sell Directly to the Buyers
With drop shipping, you get to sell directly to a buyer through a wholesaler. Why is this so amazing you might ask because once become affiliated with a wholesaler you can sell that product directly on your site.
Now you might be wondering, why not just sell the product on eBay or Amazon and the short answer is that most wholesalers strictly forbid this.
The last thing they want to do is compete with other people all wanting to sell their product in one place. On top of that, some brands don’t want to be associated with places like Amazon or eBay.
This is why it’s best to sell the products on your site and your site alone. When it comes to places like Amazon or eBay you have no control over those platforms and if they decide to change the rules on you, they could.
Con: Answering Support Calls
The second biggest concern I had with starting a drop shipping business is answering support calls. To put it simply I’m more of an introvert. When you’re starting a new store you’ll want to answer at least some support calls.
However, over time you’ll find that some questions will get asked over and over and if this is the case you can set up an FAQ page that you can direct people to instead answering questions in person all the time.
Another option is to hire a virtual assistant to do all this for you. It can cost you a little bit of money but with a little bit of setup and training, you’ll be able to outsource this part of your business as well.
Pro: You Don’t Have to Buy a Bunch of Products
The final benefit to drop shipping is that you don’t have to stock a bunch of products that you hope to sell. This is because you don’t have to buy the product until your customer does.
This is the real benefit of drop shipping. It allows you to take no risk investing in a product that doesn’t sell and make you money. The worst thing that can happen with drop shipping if something doesn’t sell is to move on to a new product.
Con: 2.5% Conversion Rates
When it comes to eCommerce like selling any other product you will only sell roughly 2 to 3 out of 100 people who come to your site. This means 97 to 98% of the people who come to your site will not buy.
However, when you do sell a product there are a few tips I can share here to help you earn more per sale.
Niche Down – First, you’ll want to niche down your site to a very specific product. This will help you stand out from the pack. For example, don’t create an eCommerce store that sells sports equipment. Create an eCommerce Store that sells little league baseball bats.
Sell High Priced Products – Second, you’ll want to sell higher priced products. Doing this will yield better returns per product which means you won’t have to find thousands of customers each month. For example, if you sell a $1000 product and your earn 20% of the sale you’ll make $200. If you only sell a $20 product you’ll only $4.
Upsell – Finally, the last tip is to upsell them to a related product. If they pulled out their credit card to buy one product from you, it’s likely they’ll do it to buy something else from you as well. For example, let say you sell high-end pool sticks. If they buy the stick they might be interested in buying a course on how to do trick shots.
Is DropShipping Worth It?
So is it worth getting into drop shipping? If you’re someone who doesn’t mind rolling up their sleeves and putting in a little hard work up front this can be a great way to get an online side hustle going.
Course Recommendation: If you’re looking to start a drop shipping side hustle then you’ll want to check out DropShip Lifestyle run by Anton Kraley. You can learn more about this course by clicking here.
So what are your thoughts, are you interested in starting a drop shipping business or is there something that’s holding you back from taking advantage of this ripe opportunity?
I would love to hear your thoughts about what you think in the comments below.