Gone are the days when establishing a profitable e-commerce business with low overheads was unheard of. Thanks to the dropshipping model of business, it’s now possible to get hands-on cheap merchandise and sell them off directly to customers at higher prices. However, dropshipping has a number of advantages and disadvantages which you need to be aware of before you decide to jump into it. In this article, we will take a look at the strengths and weaknesses of dropshipping so that you can make the best decision for yourself.
Requires Low Investment
Perhaps the best thing about dropshipping is that it allows you to make money immediately without investing considerable capital for a startup. You don’t even need to manage an inventory so you can establish your own business even if you are low on cash.
Has Minimum Overhead Costs
Since you don’t need to manage a warehouse or stock up the inventory, the overhead expenditure in a dropshipping business is quite low. Overhead expenses may start piling once you expand your business but even then, these expenses are quite low in contrast with the contemporary business setups.
Allows You to Take Risks
Since you don’t need to purchase items beforehand, you can take risks and experiment with different niches in a dropshipping business. Simply add new products and categories on your site, see which of them are more popular amongst the customers and remove the unpopular ones off the website without losing any money.
Margins Are Low
Because dropshipping is highly competitive, the profit margins are quite low as customers often compare your prices with those of your competitors. And because you’re deferring your orders to a third-party supplier, it is they who mostly benefit from wholesale prices and discounts.
Is Dependent on Other Companies
A dropshipping business relies on other e-commerce companies such as Worldwide Brands or Sale Hoo to fulfill customer orders. This not only limits the customer support services you can provide from your end but also puts the future of your business under a risk.