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is dropshipping a good business
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Are you considering dropshipping for your new business? Of course you are – it’s one of the most popular business models there is, and for good reason. But while anyone can dropship, it isn’t foolproof.

Fortunately, dropshipping solutions like the Shop1 platform can address and alleviate many of the struggles of this industry.

However, there are still obstacles to overcome (and if there weren’t, we’d all be rich), so before you start your dropshipping journey, here’s what to take into consideration (and how Shop1 can help!).

Pros

Low Barrier of Entry

One of the major reasons for the popularity of dropshipping is that just about anyone can do it. Unsurprisingly, it is also one of the biggest pros of the business model.

Traditionally, owning a business online requires a significant investment into infrastructure like inventory management, storage, and shipping. This can not only make starting a business take longer, it can get expensive as well. If your process isn’t flawless, you risk costing yourself even more time and money once business starts booming. Alternatively, your business may not even get off the ground if your startup costs are too high to pursue a business.

Dropshipping greatly lowers the barrier of entry by allowing anyone with access to the internet the potential to create a dropshipping business. Products are shipped directly from suppliers to your customers, eliminating the need to pre-order inventory and store it for processing.

Shop1 makes dropshipping even easier, saving you the days or even weeks it takes to build an effective website by providing proven templates to choose from for your store. You’ll also be connected with reliable suppliers so that you can focus your time on building your business, not tracking down inventory.

Suppliers Handle Processing

In many businesses, processing orders takes the majority of the business owner’s time. From receiving the order to preparing the packaging, organizing the shipping information, sending the product out, and even handling returns, there is a lot of behind the scenes work required.

In a dropshipping store, suppliers handle most of this work. When an order is received, it is either automatically sent to the supplier or placed manually after recording the relevant information. The supplier then handles all aspects of shipping (but not always returns), allowing you to spend time on other parts of your business.

Returns can be a pain for dropshipping because you lose the profit of the sale and may have to pay a fee to the supplier for restocking, or even receive the product yourself. But with Shop1, all returns are handled automatically by the platform.

Flexible Inventory and Catalog

Retail stores need inventory to sell, so they create a catalog of products, contact suppliers, and order the merchandise. Online shops often do the same, buying supplies and inventory ahead of time to prepare for sales to come. However, sales can be hard to predict and what’s selling is always evolving, so you need to be able to adapt.
When it comes to the products a standard store (online or retail) sells, there’s a constant battle between not having enough products and having too many. If you don’t order enough inventory, you’ll miss out on potential sales and profit. If you order too many, you risk time-sensitive products and trending products going out of style before you sell them, forcing clearance sales to recoup your expense (I’m looking at you, post-Valentine’s Day candy sales).
Dropshipping allows you to constantly refine your store’s catalog, adding and removing products that go in and out of style or fill a need in your industry. Inventory is also only purchased when an order is made, so you never have to worry about balancing your inventory or realizing losses down the road.
With Shop1, you can import hundreds of products from your industry into a store or hand-pick them yourself from a wide range of US-based suppliers. No pre-orders, no storing items, and better flexibility makes it easier to manage your store’s stock.

Easily Scalable

When you start your own online business, your first few sales are something to remember. You put all the time, love, and care into them to make sure they’re perfect. However, as more sales come in, your processing times shoot up, requiring new infrastructure to accommodate the sales volume.
Dropshipping is a business strategy that has little difference between low sales and exceptional sales (except for your profits). Most of the processing is handled by the supplier (and if you use Shop1, returns are as well) meaning you don’t have to worry about handling a hundred orders per day. You can advertise and scale your sales as needed – dropshipping can keep up (supplier inventory permitting).

Cons

Lesser Control Over Customer Experience

The downside of hands-off processing is that you lose control over the customer’s experience with the product. Shipping directly from the supplier saves time, but because you never see the product being shipped out yourself (aside from ordering your own samples), it’s harder to guarantee a positive experience. You also lose out on some branding potential like custom packaging, included samples, or business cards.

Shop1 helps to provide more confidence in the products you sell, working with vetted US suppliers who provide a higher standard or service, shorter shipping times, and the reliability you need to create an effective dropshipping business.

dropshipping profit margin

Low Profit Margins (fees)

As with all business, the margins you can achieve will shape your company’s approach to inventory, marketing, and fulfillment. If you are spending more on wholesale costs, you either have to charge more and risk not securing a sale, or absorb the expenses and work with lower margins that provide less room for growth. Plus, many suppliers and dropshipping platforms charge a fee for use, fee upfront for access to supply, order fees, and other nickel-and-dime expenses to account for.
Unfortunately, dropshipping doesn’t often provide exceptional margins to start out with. The suppliers you are working with are likely part of many store catalogs, which means that you are competing against other stores’ prices. This leads to thin margins that rely on seamless processing to avoid refunds and a higher quantity of orders to make significant income.
Fortunately, Shop1 helps to minimize the “hidden” expenses associated with dropshipping. The wholesale prices you receive are exactly what you pay for each product – no extra fees on top of each order. With certain plans, you can also unlock reduced or free shipping on orders, allowing you to pass through the savings to your customers with lower prices, earning more sales and making the most of those thin profits.

Inventory Management

Although you don’t have to worry about maintaining stock on-hand for your entire catalog, you still need to be sure that the products you sell are available. When processing your own orders, you can easily see your current inventory and keep track of stock. 
In the case of dropshipping, you are often working with one or more suppliers with individual stock counts for their products. Not all of these suppliers provide automatic updates, which means that you’ll have to reach out to get an idea of what kind of supply is available. For high-volume stores, this can cause gaps in supply that lead to delays, canceled orders, and lost profit.
The Shop1 platform automatically handles inventory management for you, tracking available stock from suppliers and updating the quantity available accordingly in your catalog.
Dropshipping Competition

Competition Has Grown

Dropshipping has become incredibly popular because it is one of the most accessible business models for entrepreneurs to use. Low startup costs, hands-off processing, and an emphasis on marketing are selling points for people with no business experience but some internet savviness.
Sadly, this means that there are an exceptional number of stores to compete with. Competition means less pricing flexibility, a higher customer service requirement, and even more reliance on marketing to get people onto your site – perhaps the hardest part of dropshipping.
To help you beat the competition, Shop1 ensures you have a functioning and effective site, simple payment processing, clear costs, high-quality supply, exceptional customer service, and more. Saving this time and money allows you to invest more into advertising and making your business stand out in other ways, helping your business to succeed.

Wrap Up​

As with any business model or strategy, dropshipping has pros and cons that can help you to determine if it’s right for you.
The major benefits include minimal startup costs and hands-off processing of orders, while the major downsides (low margins and lesser quality control) come as a result of these same positives.
Shop1 Business

Fortunately, Shop1 makes the pros even better and the cons less intimidating. From creating your store to handling returns and customer service, Shop1 is there to help at every step of the way. You’ll save time and money with the comprehensive platform that includes free shipping (in select plans), free returns, and no hidden fees. Plus, all the suppliers are researched and verified to be legitimate, helping to raise the standard of quality your customers can expect from your company.

If you think dropshipping is for you (and it probably is), Get Started today with Shop1.

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