There has been a trend brewing on Shopify stores for a couple of years now, Dropshipping. A low-budget, straightforward and fast way to sell products online, powered by the might and simplicity of Shopify.
Of course, Shopify didn’t invent the term or the practice. Still, it certainly allowed many people to come into the Dropshipping world powered by its simplicity, straightforwardness, and low entry prices.
Dropshipping is a well-known online trend, and as such full of myths, half trues, and falsehood, and in this article, we’ll like to clarify them, along with a bit of history and definitions.
Let’s dive into it, shall we?
Dropshipping has existed since 1999, but its growth was slow and interrupted by the dot.com bubble burst in 2001. The total recovery and dropshipping as we know it nowadays are thanks to the rise of CMS platforms like Shopify.
Dropshipping is an online store model in which you sell products online but don’t have stock, warehouses, nor manage the shipping, but you only control the selling, the customer service, and the returns. You act as the intermediary between the seller and a buyer, and when a customer purchases a product, the seller sends it directly to the purchaser.
“The global dropshipping market size was valued at USD 102.2 billion in 2018 and is expected to register a CAGR of 28.8% from 2019 to 2025″– Grand view research webpage.
In this model, you only need to focus on having a good seller product, some knowledge about Ad managers (like Facebook or Youtube Ads), and a good-looking functionality-oriented online store, and here’s where Shopify makes a glorious entry.
If you search Dropshipping on Google or youtube, most definitely you’ll find tutorials on how to find the right product, how to make attractive Ads and where to locate them, and how to build your online store with Shopify. Why not other Content Management systems (CMS) like WordPress, Prestashop, or Magento? Because non is as intuitive, efficient, and good-looking as Shopify when creating an online store. Shopify has proven the best CMS for your online store necessities year after year.
To understand this article better, you might want to read our piece E-Commerce since the 2019 Covid pandemic, what has changed? as well.
Let’s talk about the good aspects of the dropshipping model for online stores.
Fast development, implementation, and sales
The time needed between the idea and your first sale is short. You can do it in a week if you know what you’re doing. The requirements to implement an online selling store are just a few: a product, e-commerce, and ads. That’s pretty much it. This can take you a long time if it’s your first time, of course, but it could take a day to have a product available online when you get the hang of it. Although, the expert dropshippers take their time to research both the product and the audience.
Low maintenance cost
Most DS stores started with a light budget for purchases and advertising, which is the right way to do it. DS distinguishes itself by its low-budget investments. Anything between 1.000 and 5.000 United States dollars is an ok amount to start an online DS store, depending on the product, the manufacturer’s factory location, and your buyer location.
No business knowledge as an entry barrier
In general, if you want to start an online store, you need to know about business, supply lines, manufacturies, inventory management, and all those bits of knowledge that made having a store, online or physical, a challenging endeavor for most of the people. To the mentioned above, add knowledge about websites, purchase carts, payment methods, online inventory, client support, target audiences, and marketing campaigns creation and management if the store is online. Of course, no one knows those things, and most employ people to provide such services.
With DS and Shopify, you don’t need any before-mentioned knowledge. In fact, DS is primarily a one-person kind of endeavor. That is one of the reasons for its popularity, by the way. To reduce it to simple words, you need to find an ok-seller product, create your online store, make ads and start selling. With this, I don’t mean to say that DS is easy but indeed is more accessible than the classic online method, no doubt about it. And with that comes the bad things, of course.
Ad manager knowledge
Mostly the only knowledge you need you can easily find over the web and Youtube. Ad manager and ad creation knowledge are essential to make it in the DP world.
If you want to establish a DP online store or any online store, you should be using Shopify for many reasons.
- The most used online store platform, has the best reputation and the most extensive audience worldwide.
- It has the best customer support in the industry, entirely in tune with your needs as a store owner.
- It has its own community of for-hire experts on all the aspects of store management, like marketing, accounting, shipping, warehousing, among others.
- It has a Complete integration with other systems and apps to manage your inventory, payment systems, re-marketing emails, and even with online platforms like Amazon and Alibaba.
Want to know more about Shopify? Please read our article about Why use Shopify for your restaurant and food and drink business. It’s super interesting!
Dropshipping has specific characteristics, and although these are not written on stone, most of the time, people accept those characteristics and live with them. Some of those are good, and some are bad, defining this niche as a low-budget, low-return way to invest your money. Some of the bad aspects are the following.
No brand associated
When you start your DS business, you don’t have a brand waiting around your house drawers for you to use it. And even if, for some reason, you have a created brand, you can’t use it because almost nothing is yours, only the online store. Your store might have a name, but a name is not a brand. A brand has several characteristics that make it be a brand, like product and services, customer service, policies, and a name. In this case, you only have a name, and the products you sell belong to other businesses. If you try to brand the products you sell, you might incur a felony in the worst case and waste resources in the best. Any brand you put in DS will be burned in a year at the most, and we’ll explain in the next bullet point.
Low-return on investment
Let’s say you have everything ready and running. You have your ok-selling product, online store, and even you got a freelancer over the web to help you manage customer support. Now comes the sales. Online “gurus” on the matter will tell you that you need to have between 100 and 200 percent over your investment, and they are not wrong. If you had less, you would hardly earn anything. Do you know how expensive it is to ship a HellowKitty wristband from China over Europe or America? I don’t, but I know it’s pricey and budget-inefficient. You have to break through that barrier and still have a competitive price to invest in ads and then earn pocket money. How do you think that is achieved? by selling cheap products overpriced on a 100% resulting in something still affordable. And when I say cheap, I mean low-quality products at a low price.
Everything has good and bad sides, right? But what we often fail to mention are the ugly sides of things, those bad things that are so bad that they require their own category to separate them from the rest. In general, these things might discourage you from an adventure, but a true entrepreneur knows that you either live with it or transform it into an opportunity.
Customer service cycle:
Many DS’s model characteristics lead to a bad customer experience, establishing an ineffective customer experience cycle, and the most critical factors are two.
The first factor is the detachment between the store owner with the product and the customers critically contributes to the unpleasant customer service experience, which causes congestion in your store message inbox, leading to long queues in the support and the return requests. In general, DS uses Chinese manufacturers to sell in the western regions of the world. This determines that you don’t ever touch nor use the product you’re selling. Many dropshippers buy the product beforehand and start selling it, which is an excellent and recommendable practice. Still, when testing it, you don’t know how people respond to the product. (let me give you a hint, not so well) Most of the products you can find in dropshipping stores are trash, which generates a lousy image over yours and dropshipping stores in general. Because of the above, most DS stores die buried in customer support and returns requests. Over time, this might be the less time-efficient aspect of the DS model. The first employee you might have will be a customer support advocate if you have any.
The second factor is the returns requests. You can expect significantly more return requests than in the classic online store model, and it’s for the reasons exposed above, which generates a cycle of bad customer experience. Because of the quality of the product, the quality of the customer service, and the lack of a recognizable brand, most of the first impressions at home are tainted, leading to a return request, which saturates your inbox, leaving you with less time to research products and your audience. At most, the only approach between the store owner and the buyers will be when creating the ad’s target audience and in the store inbox, which will be primarily complaints.
No room for growing
You don’t have a brand or a product; therefore, you don’t have customers. You might have buyers, but never customers. It’s almost impossible to develop a relationship with one of the buyers because most of the time, the platform is not customer-friendly, and their experience is worse than other online stores.
Short term only
Businesses need to grow, and if you don’t, you can’t play long-term. Would you even want to operate a company with such low flowing and congested characteristics? You well might want to, but the model it’s like the snake that eats itself; your DP store can only live as long as your store reputation allows it, and the reputation of your store is not the most well-maintained element of most DS stores. At some time, you have to evolve into an actual and well-established online store to grow and boost your profit margin. This way, you can invest in the crucial issues in an online store, the customer experience.
Is it possible?
It is possible, but not as most people think, a make-yourself-rich-fast-way. It’s a well-planned, hard-working, and low return of investment method to start making your way online. Most of the most successful personalities in the Dropshipping world have transcended the DS method and have their won brands and stores now, and whit that goes away the good things about DS. Supply and warehouse management, shipping, and delivery become your responsibility, and you have to deal with them daily.
The best characteristic of the DP is that you can use it the pave your way to a well-established online store with a brand and a long way ahead for growing. Plus, if you already have a successful online business, you can still use DP to broadly test new products, manufacturers, and target audiences.