Some years back, the Dropshipping business model was all the craze.
Many successful entrepreneurs touted stories of passive income.
The “Laptop Business” was thriving.
But for those who missed the surge – does Dropshipping still work in 2018?
And are people making profits with this business model?
These are some questions we will aim to answer.
But first, a quick primer for those who are new to the Dropshipping idea.
What Is Dropshipping?
Dropshipping is a business model.
It takes product development and order fulfilment out of the business owner’s hands.
Instead, this responsibility is outsourced to manufacturers.
Here’s how it works:
- You set up a website that sells products, chosen from a range of manufacturers that support Dropshipping.
- Customer orders from your eCommerce store and pays you.
- The order gets passed on to the manufacturer and they send out the product directly to the customer. The product never reaches your hands. Usually, they will also accommodate for your branding / labels. The customer doesn’t know you hold no inventory.
- You get charged fulfilment and product manufacturing fee.
- Customer receives their product and your profit is the difference between the selling price and cost of fulfilment / manufacturing.
Compare this with a “traditional” eCommerce store:
- You buy inventory and set up a website
- Customer buys from your store
- You get paid and send out the product to the customer
The major difference is the upfront investment into inventory.
Under the Dropshipping model, the inventory never enters your hands.
So the major advantage is, Dropshipping businesses require very little upfront capital to start. All you need is a eCommerce website that integrates with Dropshipping suppliers (e.g. WooCommerce or Shopify).
It also means you don’t have to sell all your inventory. It represents reduced risk because there are no inventory costs for your business.
Essentially it allows you to sell products “on-demand.”
Pros And Cons Of The Dropshipping Model
As attractive as the proposition sounds, Dropshipping has its flaws.
Here are the pros and cons:
- No cost of inventory – there’s no need to sell all your inventory since you don’t keep any.
- Low starting requirement – you don’t need a lot of capital to start. Just enough to build the eCommerce website and pay for traffic.
- No product development – with the rise of Dropshipping, you no longer need to build your own products. Suppliers like AliExpress provide a huge range of products you can pick from and sell.
- Low risk – because of the above points, there is very little risk. Even if your store makes no sales, you don’t lose much.
- Can make passive income online – since you are not fulfilling products or making them. You can focus purely on the marketing aspect.
- Unable to develop a Unique Selling Proposition – marketing is difficult because essentially anyone can come along and sell the exact same product from the same supplier.
- Can be extremely competitive – because of the low barrier to entry, there are many Dropshipping businesses.
- No control over fulfilment – if a supplier delays shipping (or makes a mistake), the customer will blame you for it.
- Low margins – the only margin you can make is based on the supplier price and the price you sell the product at. This leaves little room for error.
- Customers can directly purchase the same products for cheaper – since suppliers like AliExpress also sell to the public, it is very easy for a customer to simply purchase directly from the supplier.
So Does Dropshipping Still Work In 2018?
The short answer is, yes.
However, it is more difficult due to the increased popularity and competition.
It is not an easy, “build it and they will come” situation.
For example, paid advertising is more expensive (because there are more advertisers). This means there is less room for error, since Dropshipping does not offer large margins.
And it is still possible to build Dropshipping stores that generate a flow of passive income every month.
For example, there are plenty of success stories of people continuing to profit with Dropshipping stores in 2017 – 2018. Like this one, where Kate built a store that generates $32,000 per month.
You can view more success stories here.
Is It Worth Starting A New Dropshipping Business In 2018?
The answer to this depends on what your goals are.
The Type Of Entrepreneur Dropshipping May Be Good For:
If you’re happy to make some passive income on the side, while learning how to run an eCommerce store – yes Dropshipping is a great model for you.
There’s little risk and starting capital required. It will teach you all the basics of running a store online, marketing and making sales.
For example, it is very easy to start a Dropshipping store that sells custom printed T-Shirts.
The Type Of Entrepreneur Dropshipping Might Not Be Suitable For:
However, if you are an experienced entrepreneur looking to build a large-scale eCommerce store, Dropshipping may not be attractive for you.
With the surge of popularity, competition is fierce and it is difficult to build a competitive advantage.
Everyone is selling the same products from the same suppliers.
Furthermore, consumers are savvy and will price shop. Google will inevitably show them cheaper alternatives, meaning you will lose the sale.
Because of this, conquering and sustaining a significant part of a market is difficult with the Dropshipping model.
Overall, Dropshipping is a great way to get started in eCommerce with low risk and low capital.
Skills You Can Use To Ensure Your Dropshipping Business Will Succeed In 2018
If you are confident of your ability to build a brand around yourself (or a specific lifestyle), branding can provide the competitive edge you need to sustain a Dropshipping business.
You’ll have to use Youtube, Blogs, Social Media etc. to gather a “tribe” of fans.
Then your Dropshipping business can provide a way to generate an income from your fan base.
For example, several Youtube personalities sell custom T-Shirts through Dropshipping because they already have a passionate audience.
Deliver Value Through Expertise
If you are an expert in a specific niche (and have proof to back it up), you can build an audience around the value you provide.
For example, if you have expertise in Cryptocurrencies, you could provide advice and valuable information to your audience.
Once you have built trust and credibility, you could sell Cryptocurrency related Dropshipping products (such as encrypted USB Drives).
Become a Paid Advertising Expert
The way most people succeed with Dropshipping businesses is by learning paid advertising on platforms like Facebook or Google.
It is especially popular to advertise Dropshipped products to Facebook users, because of the low cost of advertising (compared to Google Adwords). Facebook also has a massive user-base whose interests can be laser targeted.
Many savvy Dropshippers opt to learn paid advertising because it offers the ability to start small (e.g. spending $5 on advertising each day). It can also be scaled to massive amounts and some Dropshipping stores boast earnings of 6 figures every month.
Additionally, Dropshipping can be a great way to learn how to do paid advertising on platforms like Facebook.
Identify and Hop on a Trend Early
Huge profits can be earned in a short period of time if you are an expert in paid advertising and able to identify a booming trend.
For example, when “fidget spinners” were booming, several savvy entrepreneurs were able to make a bundle by identifying this trend early.
They built Dropshipping stores and sold these products in high volume through platforms like Facebook.
Another example was when Hoverboards became extremely popular.
However, this strategy cannot sustain profits as competitors enter the market. There is a short window of opportunity before others catch on. And because of the low barrier to entry, the market gets saturated quickly.
Once profits dry up, these Dropshippers often move onto the next trend to repeat the process.
For Those Interested In WooCommerce Dropshipping…
If you’d like to start a Dropshipping business on the WooCommerce Platform, try the WooCommerce Dropshipping Plugin.
It makes it easy to sync your store with suppliers, so they can ship out products to your customers when orders come in.
It also automates custom packing slips, so your customers will be delivered your branding and business logo on the shipped products.
Dropshipping still works, but you’ll have to put in more effort due to increased competition.
Overall, it is a great way to learn how to make sales through eCommerce due to its low capital requirements and low risk.
It is also a great way to learn paid advertising and generate some passive income for yourself.
However, it may present too much of an unnecessary challenge for experienced entrepreneurs who wish to build large-scale eCommerce stores. For people with these requirements, there are better options out there.