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Dropshipping — the eCommerce sensation!
It’s a business model that’s been used by thousands of entrepreneurs to kick-start their eCommerce journey, and thousands of Shopify store owners are still using it.
But the crucial question is:
Yes—it’s worth it as long as you do it the right way.
The term "eCommerce" is an umbrella term for all types of online businesses that sell products or services. Traditional eCommerce is one of the oldest methods of doing an online business.
Dropshipping is one of the business models, within the eCommerce umbrella, that has become popular in recent times due to enhanced infrastructure and logistics.
In traditional eCommerce, the workflow may look like this:
In the dropshipping model, the workflow may look like this:
The store owner owns and maintains the inventory.
The store owner does NOT own/maintain the inventory. The supplier does it.
The store owner requires a location for a warehouse or fulfillment center.
The store owner does NOT require any such location.
The store owner has complete control over the product’s quality.
The store owner can monitor the quality through samples and feedback, but ultimately, the quality depends on the supplier.
The store owner needs to invest capital into the warehouse/fulfillment center location and raw materials/inventory.
The store owner does not require an upfront investment for these assets and only needs to pay the wholesale price as and when the order is received.
The dropshipping business model has become one of the most widely-used eCommerce models because it’s very beginner-friendly and relatively easy to start with a reasonable budget.
Also, data suggest that the pandemic has played a positive role in the growth and popularity of dropshipping businesses. Approximately 62% of U.S. adults surveyed stated they were visiting physical stores less frequently, while an additional 52% reported an increase in online shopping activity.
After the pandemic subsides, this model continued to hold a strong place in consumers' preferences, ensuring a bright future for the dropshipping industry.
When it comes to profitability, it mainly depends on business-to-business. When outsourcing the fulfillment and shipping process to a supplier, you may cut off some portion of your profit margin.
However, if you look at it from the perspective of ease of doing the business, it’s also worth the cost because they’re taking care of some heavy lifting, i.e., inventory management and the fulfillment process.
But if someone asks if dropshipping is dead, the answer is certainly “NO”. There are many profitable dropshipping businesses at the present time. That said, making your dropshipping business profitable is mostly up to you.
If you’re looking for motivation or real Shopify dropshipping results, FreshHoods is a great example. This Shopify dropshipping store has been making 6-figure revenue and 5-figure profit.
The brand placed its listing on Flippa (an eCommerce marketplace) for a whopping price of USD $5,500,000 as they're looking to shift their focus to B2B (Business-to-Business) and data-first company.
Although this is a very broad question, in general terms, Yes—dropshipping is a legally acceptable business model.
Dropshipping model isn’t any wrong practice by any means. It’s just a retail business model where the dropshipper acts as an intermediary between the customer and the supplier, which is basically what’s been done by all brick-and-mortar retailers for years and years. Dropshipping is just its online version.
That said, you may need to check the laws and regulations in your country or where you want to sell your products. There could be certain types of products that may not be legally allowed to be sold. If you’re not sure about anything, it’s always advisable to consult with a legal professional.
Whether it’s dropshipping, traditional eCommerce, or brick-and-mortar business - all of them have their own benefits that come along with some challenges as well. So, let’s see the key benefits and drawbacks of the dropshipping business model.
One of the main reasons why so many people choose dropshipping to begin their entrepreneurial journey is its ease of getting started. Creating a Shopify store and setting up a dropshipping business is a fairly easy process even if you don’t have any experience with the same.
You don’t need to buy or manage inventory. Just pay the supplier as you receive the orders on your store and it’s really helpful to manage your business with a small budget. Also, since you’re not managing the inventory, you don’t need to be worried about maintaining your products in a good condition when it’s in the warehouse.
Dropshipping business can be started with a low investment because you do not require to purchase inventory or invest any capital into a warehouse or fulfillment facility.
Important note: Just to be clear, it is not to say that dropshipping can be started with no money. Don’t fall into that trap. It will require money, so be prepared with a reasonable budget to manage your Shopify bills, advertising and marketing costs, and other miscellaneous costs.
Dropshipping business model is very flexible in the sense that you can test the different products before finalizing which ones you want to sell on your store. You don’t need to buy bulk inventory and that reduces the huge risk. If one product fails, you can switch to another one, post doing some more market research and testing.
It’s quite obvious that since it's a popular business model, you may also have to face competition from many similar businesses in the market. Also, it’s possible that your supplier may be selling the same product to other store owners as well, meaning the same product could be sold by many stores.
Make Your Product Unique: Your product may not be unique in the market unless you do some differentiation in the product. But you will need help from the supplier to do so. You can come up with an idea to modify your product or add extra features. Communicate the same to your supplier to see if they can implement those changes.
One of the biggest challenges with dropshipping is that you can’t totally control the quality of your products. Sometimes, it may happen that you can come to know an issue when you receive feedback from your customers. And that’s why it’s very important to find a reliable supplier who can deliver quality on a consistent basis.
Dropshipping businesses can be profitable. But we still can’t neglect the fact that you do have to pay a certain price for handing over the production, inventory management, and shipping to a third party. After all, they also need to keep their margin. So, it reduces your profit margin to some extent.
As we discussed before, it’s possible that customers can get the same product from other stores as well. Also, depending on your supplier, it may or may not be possible to put your branding (brand name and logo) on the product packaging. All these factors make it difficult to build your brand.
Explore the Private Label Business: If you’re serious about building your brand, you should explore suppliers that offer private-label products. Private label products are the ones that are unbranded by their manufacturer and supplier and they allow you to sell those products with your own branding.
While some dropshipping suppliers may provide you a real-time inventory tracking, it can’t be as good as tracking inventory in your own warehouse. You don’t want to run out of stock especially when your product is in high demand. However, you need to rely on the supplier to keep enough inventory in stock to manage your orders.
Learn more: 10+ Best Shopify Dropshipping Apps in 2024
When you search the keyword “dropshipping” in the search bar of the Shopify App Store, you will find many different apps that are relevant. You can review their features, ratings, and reviews to choose the best app for your dropshipping business.
Pro tip: To embark on your business, we offer an exclusive $1 package, including Start your business on Shopify - build your store with GemPages - Source products and fulfill orders with Dropshipman - Track orders with PacelPanel. Sign up for this package to ensure profit at the early stage.
While dropshipping offers you the flexibility to sell a wide range of products, it can also be tough to decide what exactly to sell on your store.
Before we jump into the list of specific product ideas, let’s see the general logics that could help you to find products with the higher potential to increase your sales:
There are certain products that we all need to replenish on a recurring basis. This can also give you the chance to build a subscription model in your business. For example, beauty and skincare products like face wash, shampoo, body wash, and make-up items are usually purchased on a repeated basis.
There are several occasions throughout the year when people love to gift items to their loved ones. Some gift items could be needed only during specific seasons or holidays but there are other items that can be given as gifts no matter what season it is.
For example, jewelry items can be gifted on several occasions throughout the year. Ring to Perfection is one of the Shopify stores that we’re reviewed and included in our list of Top Shopify Dropshipping Stores that you can learn from.
Rings to Perfection offers luxury jewelry products like bracelets, anklets, and rings to its customers at affordable prices.
Just like individual customers require some products on a recurring basis, there are also some business clients that require certain products on a regular basis. For example, if you’re selling stationery items to a business client, you can build a long-term relationship to get continuous business from them.
Also, there could be some products that they may not require on a repeated basis but in bulk quantity. For example, office tools or equipment.
Now, let’s take a look at some of the top product categories and examples for dropshipping businesses:
Considering the increasing popularity of digital content creation, you have a great opportunity to sell products that are specifically produced for such content creators. For example, many content creators require ring lights for creating video content that they publish on different platforms.
Here are some of the products in this category: Portable chargers, tripods, microphones, camera lenses, backdrops, etc.
Gaming products also offer you a wide range of products that are in high demand due to people’s love for gaming. Here are some examples of gaming products: Gaming keyboards and mice, gaming earphones, chairs, posture correctors, and so on.
When brainstorming product ideas, always keep in mind that you should try to find out the products you are passionate about. Apart from checking the profit potential of the product, it’s also important to ensure that the product is aligned with your values.
Home décor products also have a good market because we all love to see our homes look beautiful. Some examples of home décor items are clocks, posters, candle sticks, lighting, bedding, pillows, etc.
Also, kitchen items are something that people need to use in their day-to-day life and it makes their job easier. Here are some examples of kitchen tools that you can sell: Pop-up toasters, cookie cutters, vegetable cutters, foldable trash bins, etc.
We all know women love shopping. And if you want to sell clothing and apparel products, women are your best customers. Within this niche and product category, there are many different products that you could sell on your Shopify dropshipping store.
Here are some of the products in this category: Crop tops, dresses, leggings, lingeries, one-piece swimwear, and the list goes on and on.