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Dropshipping in 2022: Pros and Cons, and Best Practices to Ensure Your Success
Dropshipping's popularity is undeniable. But, don't take our word for it; these stats speak volumes:
Dropshipping accounted for almost a quarter of online sales in 2021, totaling $85.1 billion.
Nearly 33% of online stores use dropshipping as an order fulfillment model.
Between 2020 and 2026, dropshipping's market size is expected to grow by an average of 24.3% each year.
With so much hype surrounding dropshipping, you might be considering dipping a toe in the water. If so, like with any new business venture, it’s wise to be as well informed as possible. This includes being fully aware of all of dropshipping's pros, cons, and how to find reliable dropshipping suppliers.
So let’s take a look.
What is Dropshipping
Before going any further, let’s all get on the same page: what's dropshipping?
In a nutshell, dropshipping is a way to sell products online without fulfilling the orders yourself. In other words, it’s an order fulfillment method where you don’t have to store, pick, pack, or ship products to customers. Instead, your job is to sell items via your eCommerce store and handle the customer service side of things.
Here's how it works:
Once an order is placed, it's sent to your chosen third-party dropshipping provider, responsible for picking, packing, and dispatching the product to your customer.
Sounds simple, right?
Well, yes, and no.
While it's totally possible to build a successful dropshipping business without some of the burdens faced by traditional retailers, you still have to:
Manage your business on a day-to-day basis
Keep customers happy
Source good quality products that actually sell
Develop solid relationships with your dropshipping providers.
That said, let’s look at the core advantages and disadvantages of dropshipping:
Benefits of Dropshipping
There are several positive aspects to dropshipping:
If you already run an eCommerce business, adding extra items to your product catalog is easy. This is especially handy if you're looking to add large, heavy, and bulky items but don’t want to store or ship them yourself. With a dropshipping supplier like Spocket, you can import entire lists of products with just a few clicks.
Dropshipping is a more affordable way to run an eCommerce store because you don’t need to pay for inventory upfront. Instead, your customer orders from you, and once they've paid you, you then pay your supplier. Also, there aren't any storage costs, and therefore, no expensive warehouse leases to negotiate or warehouse staff to pay.
With dropshipping, it's easy to road test dropshipping suppliers and their products without entering lengthy commitments.
You can set your own product prices. Your supplier will charge a base price for their products. However, you decide how much you charge customers and how significant your profit margin is.
It's the responsibility of the dropshipping supplier to handle the majority of the returns process. That said, not all suppliers permit returns, and you may still need to liaise with customers to ensure your brand offers excellent customer service. This is one of the many reasons it’s imperative to thoroughly research your dropshipping suppliers. At this point, it’s worth noting that some dropshipping supplier platforms like Spocket rigorously vet their suppliers and require a minimum refund policy to replace or refund broken, incorrect, or missing items.
There’s no inventory to manage. Typically, eCommerce and physical store owners buy products to sell in advance. As such, there are product delivery times to consider; you risk losing sales if stock runs out, not to mention it can be expensive to manage inventory, mainly if your stock doesn’t sell. Of course, dropshipping rid you of these concerns.
You can dropship on popular online marketplaces, including Amazon and eBay. However, there are a couple of things to be aware of:
Amazon: You have to be the seller of record for your products and remove any details identifying your dropshipping supplier. In short, this means you’re the legal entity liable for the products you sell. This also means you must be identified as the seller on all invoices, packing slips, and the external packaging. Not to mention, you’re also responsible for accepting and processing returns. Fortunately, Amazon has an entire policy dedicated to dropshipping, which is worth familiarizing yourself with before you start dropshipping with them.
eBay: eBay, on the other hand, doesn’t require you to list a seller of record.But, you (not your dropshipping supplier) are responsible for the safe delivery of products within the specified timeframe on the product listing.
Depending on your dropshipping supplier, you might be able to extend your reach by making sales overseas. While international sales can be costly for both seller and buyer, it’s worth exploring as an option as you expand. It’s also worth checking how long your chosen supplier takes to ship internationally. Again it’s worth noting that Spocket’s suppliers aresituated worldwide, and Spocket offers 2-5 day shipping to European, Canadian, and US customers.
The above pros are just some of the reasons you may be tempted to dropship. However, before making any hasty decisions, you still need to consider why it may not be for you.
Drawbacks of Dropshipping
You may find profit margins are low. You won’t benefit from bulk discounts like larger retailers do. Also, dropshipping products tend to be lower ticket items that don’t achieve high retail prices. Not to mention, when you consider shipping may further eat into your profits (especially if you want to keep product pricing competitive), profit margins are often tight. So if you're going to make a profit, the pressure is on to sell a lot. In addition, you have to allocate a budget for website maintenance, marketing, customer service, etc. To help counteract this problem, Spocket’s premium users have access to discounted dropshipping products, which often achieve more attractive 30-60% profit margins.
The competition is stiff. Over 12% of all Shopify stores sell dropshipped products. So, hundreds of other stores likely are selling the same merch as you, competing on customer service and brand alone. Therefore, the pressure you need to ensure your products and online store stand out from the crowd. Here, shipping can be a decisive factor. As many as 66% of customers will leave you for your competition if they can provide more shipping options. So, bear this in mind while picking your dropshipping suppliers.
You can’t control your eCommerce supply chain. The advantages of not handling inventory are clear. However, you can’t quality-check products before they’re sent to your customers on the flip side of the coin. All it takes is one less-than-perfect set of products, and you may find yourself on the receiving end of bad reviews. That’s why it’s so important to find a consistently reliable supplier.
You can’t control your logistics. If your supplier experiences unforeseen delays, your business suffers. It's that simple.
Things to Check Before You Start Dropshipping
While theoretically, you can get your dropshipping business up and running in just an hour. We don’t recommend hurrying up this process. Like any other business venture, to harness the best possible results, launching a dropshipping brand requires careful planning and a range of different tools to lay the right foundations.
In light of that, ask yourself:
What’s your store’s niche? Pick a niche that interests you so that when it comes to marketing your products, you can do it with authentic passion. It should also be something viable, with sufficient audience interest. So be sure there’s a market for the products you’re hoping to sell. Unfortunately, as many as 42% of start-ups fail due to a lack of customer demand. If you're unsure where to start with this, here are some pointers:
Search keywords relevant to your niche on Google Trends to see if it garners sustained interest.
Use product research tools to collect information on what competitors are selling and how much competition is in your prospective niche. The goal is to find a niche with high interest but little saturation.
Spend time in online communities relevant to the niche(s) you're considering. Pay attention to whether there's a need you can fulfill that isn’t currently being met.
What’s going to make your brand different from all the others? Traditionally the majority of dropshipping stores ordered from the same suppliers, so giving your brand a unique edge was tough. So, how are you going to stand out? What will make your website design and product offering special? How can you offer a customer experience that competes with the rest?Spocket can help with the latter. Thanks to their supplier vetting process, all products in their catalog are good quality, come with basic refund and returns policies, and order tracking.
Who’s your target audience, and where are they based? This is a vital question to answer before you start looking for suppliers. For instance, if your customers are in the US, picking suppliers from China could adversely impact shipping times (and costs). So, once you know where your customers are, you can start searching for suppliers in their region to ensure faster shipping.
Do you have an existing tech stack? To start dropshipping, you’ll need your own online store. If you don’t have one already, you can use a wide range of eCommerce platforms to build your own site. But considerations don’t stop there. Your dropshipping store won’t get off the ground without a thought-out marketing strategy. You may require email marketing tools, a blog, insightful analytics, affiliate marketing programs, pop-ups, lead-generation forms, etc.Not only will these needs influence your chosen eCommerce platform, but also the dropshipping supplier platforms you can integrate with.
How To Find A Reliable Dropshipping Supplier
If you want to find a reliable dropshipping supplier, here are a few things you can do to hit the ground running:
Search Google. Unfortunately, many suppliers haven’t mastered their marketing strategies and are still a little old-fashioned. So, you might only find decent results on the second or third page of Google, and the websites might look a little clunky. But there’s no need to discount those contenders just yet - just make sure you get in touch to vet them (more on this in a sec).
Contact reputable manufacturers and ask them for a list of their dropshipping suppliers.
Do some digging on eCommerce/dropshipping Facebook groups and forums.
How to Vet Suppliers
Get in touch to see if they respond promptly.
Order product samples to assess product quality and shipping times
Check their warehouse locations and ensure they can ship to your target audience within a few days and without hefty costs.
Review their refund and returns policies
See what, if any, customization options they offer. Some suppliers offer custom packaging or will throw in a little something extra in with the package, like your business card or a little note.
Avoid Dropshipping Supplier Red Flags
Here are a few red flags to avoid when searching for reliable dropshipping suppliers:
Suppose the supplier doesn’t know much about the product they’re selling. In that case, this is a huge warning sign - primarily if you’re dropshipping electronics or other complex appliances.
You can’t find a business address. Often this is a good indicator that the company doesn’t really exist.
You can’t get a hold of them via phone or email. Never buy from a supplier you haven’t been in touch with.
They charge a monthly fee. Suppliers shouldn’t be charging you anything until an order comes through.
They sell branded products. Be wary of copyright infringements. While the laws around intellectual property are slacker in countries like China, your store might be shut down in the EU or US if you sell branded items that aren’t yours. For instance, if a dropshipping supplier sells Nike or Adidas or prints marvel characters on their products, there’s a good chance these are counterfeits that shouldn’t make it onto your store.
If all this sounds like a lot of effort just to get a few supplier names, you might be right. This is where using a reputable dropshipping directory comes in handy…
Finding Suppliers with Dropshipping Directories
Suppliers need to find sellers like you, just like you need to find them. That’s why thousands of suppliers list their products on dropshipping directories.
So, instead of manually browsing Google for reputable suppliers, you simply search through a catalog of products relevant to your store’s niche. Once you’ve found the products you’re interested in, you can learn more about the listed supplier, like their warehouse locations and other product offerings. For instance, Spocket lists supplier profiles where you can review all this information, as well as their fulfillment rating.
Another advantage to using dropshipping supplier platforms is that they often integrate with various eCommerce platforms, like Shopify, BigCommerce, WooCommerce, and more. These integrations enable you to import products to your store’s catalog with just a few clicks.
Using Spocket as an example, it's as simple as finding the products you want to sell, then:
Setting a profit margin
Editing the product title and description
Adding any other details, you wish to include on your product page.
Top Tip: Opt for dropshipping supplier platforms with a vetting process. For instance, Spocket vets its suppliers to ensure they:
Provide high product quality
Own all their own warehouses
Offer a basic refund and returns policy for broken, missing, or incorrect items
Offer discounts from their standard retail prices
Have fast order processing and shipping
Provide order tracking on their shipments
Generally speaking, dropshipping supplier platforms are free to use but may charge a monthly fee for special perks. For example, access to premium, exclusive or best-selling products, discounts, and other valuable features.
Ready to Start Dropshipping and Find a Reliable eCommerce Supply Chain?
Dropshipping is a tempting business model for many reasons. So it’s no wonder so many solopreneurs have jumped at the chance to use it to launch their own online stores.
But as with all things, dropshipping isn’t without its challenges. No matter which way you spin it, ensuring a reliable eCommerce supply chain and high-quality suppliers are at the very top of the list when it comes to laying the foundations for a successful dropshipping business.
Fortunately, dropshipping directories comprising hundreds of suppliers can speed up the search and present you with an exciting range of products.
But don’t be tempted to skip your research - read reviews, get in touch with suppliers, double-check their policies, and order product samples. Only then can you be sure to avoid unreliable suppliers.
We hope this article has served as a helpful introduction to dropshipping. Are you starting your own store in 2022, or are you contemplating adding products to your existing catalog? Either way, tell us all about your plans in the comments box below!
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Rosie Greaves is a professional content strategist specializing in all things digital marketing, B2B, and lifestyle. In addition to Spocket, you can find her published on Reader's Digest, E-commerce Platforms, and Judicious Inc. Check out her website Blog with Rosie for more information.