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What’s the Pros and Cons of Dropshipping?

What is Dropshipping?

Dropshipping is an e-commerce business model in which you don’t keep products in stock or manage fulfillment. Whenever a customer orders a product from your online store, you pass the order to a supplier who then ships it to the customer. You earn through arbitrage.

Dropshipping VS standard retail?

The biggest difference between dropshipping and the standard retail model is that the dropshipper doesn’t stock or own inventory. Instead, the dropshipper purchases inventory as needed from a third party—usually a manufacturer or dropshipping company—to fulfill orders. The dropshipper doesn’t have to handle the product directly.

Pros of Dropshipping

Dropshipping is a great business model for those who want to start business with limited money to start with because of its accessibility. Almost everyone could start dropshipping without quitting his present job, for dropshipping business requires little investment of time and money to start. Besides, it is very easy to run dropshipping business. Here are 4 main reasons why dropshipping is such a popular model.

1. Few upfront investments & low overhead

The biggest pro of dropshipping may be that it needs to invest thousands of dollars in inventory before launching an online store. You don’t have to purchase a product unless you’ve already received an order and been paid by your customer. With very little money to build up an online store, it is possible to start a successful dropshipping business by selecting a profitable niche. And there’s less risk and pressure to start a dropshipping store without inventory purchased upfront to sell.

Because it is no need to purchase inventory, so there is no warehouse maintaining fee. With little more than a laptop or a smartphone, you can run your business within the reach of the internet. The only overhead could be the monthly fee of the online store, which is about $1 per day, it’s just a drop in the bucket compared to offline store rent.

2. Easy to manage & scale

Once a dropshipping store is successfully launched, it can’t be easier to run the business, because you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:

  • Managing or paying for a warehouse
  • Packing and shipping your orders
  • Handling returns and inbound shipments
  • Tracking inventory, continually ordering products and managing stock level

Most of these works are borne by the suppliers or dropshipping companies, therefore, you are able to expand with fewer growing pains and less incremental work.

3. Flexible working location & wide target customers

A dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business anywhere you like. Many successful dropshippers are SOHO, they allot working hours themselves, in which model, the business runners are able to travel around the world while making money at the same time.

And because an online store can be open to customers all over the world, so wherever you are located, you can sell products to wherever you like. Here’s a very interesting data from CJ App to proof this argument-most of the recipients are from the US, but many of the stores are running by registers from France.

4. Massive product source

In the business model of dropshipping, you don’t have to pre-purchase the items you sell, you can list almost all kinds of products selling online, as long as the supplier provides the dropshipping service. It’s very easy to stuff your online store with hundreds of potential winning products. And if you are a CJ user, you will find the sourcing service so amazing, just post a sourcing request with an image or a link of the product, our sourcing team will search for the best supplier and post the product on CJ App, then you can list the product to your store by some clicks.

We are updating trending products recommendation series every week, check our playlist to find more. For CJ users, please pay attention to the notification and our email push of trending products selected according to big data, maybe you can find winners that you didn’t know exist.

Cons of Dropshipping

All the pros we mentioned make dropshipping a very attractive business model. But like all the ways to make money, dropshipping has its downsides, too. Convenience and flexibility come at a price. Here are a few shortcomings you should take into consideration before starting your business.

1. Low margins in overcrowded niches

Dropshipping is all about luck and intelligent niche selection. If you accidentally select a niche that is already overcrowded you will have a hard time surviving. Because someone else will already be selling your products for a lot lower price and you will have to sell for an even lower price to bring buyers to your website.

To avoid being trapped in such an awkward situation, it is vital to select a profitable niche before start dropshipping, we have posted some videos of how to pick a good niche for your reference, and here is a useful website to test products- https://ecomhunt.com/

You can check the reference selling price to figure out the anticipated profit, and the total stores selling this product that you can judge immediately the product is saturated or not. And if you pay to gain a senior membership, you can see much other marketing information about the product.

2. Inventory issues & supplier errors

With the model of dropshipping, you do not need to purchase and manage the inventory and be free from burdensome fulfillment of orders. But this way of running a business is like a double-edged sword. When you’re sourcing from multiple suppliers, who are also fulfilling orders for other merchants, inventory can change daily. It’s hard to keep track of which items are in and out of stock. And because suppliers are tackling with tens of thousands of orders every day, even the best dropshipping suppliers make mistakes fulfilling orders, some mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments, and low-quality packing, which can cause you lots of trouble and damage your business.

Here is the advice from CJ – It’s better to choose reliable suppliers to work with, and make sure there is sufficient inventory for the product you are going run ads. Once you have a winner at hands that has stable sales, it is wise to buy the private inventory to take the stock under your control.

3. Complicated shipping costs & less control over shipping

If you work with multiple suppliers—as most dropshippers do—the products on your online store will be sourced from many different suppliers, and if a customer places an order for 3 items, all of which are provided by separate suppliers, then your shipping cost will be tripled. It is unwise to pass the cost along to the customer, so you have to bear the burden. Moreover, some customers are not happy to receive 3 parcels, which may arrive at different times when he places just one order to your store.  

But this can’t be a problem on CJ, because we have a fulfillment system, every order is shipped to the customer in one parcel.

And many droppers suffer from less control over shipping, receiving complaints from customers of the delayed delivery. This is also an important part that CJ concerned about, so we have our CJ packet to make delivery under control, 5-15days to different areas, usually faster and cheaper than e-packet. Also, we have more than 10 shipping methods for options, users can choose the best solution for a specific order.

4. Limited approach to build a brand

If you import a batch of products from Alibaba, once you reach the MOQ, you can custom the products as you like, you can have your custom pattern, logo, and packaging, so it’s easy to custom your branded products. But for dropshipping, you usually don’t buy a large amount of inventory, most suppliers offer limited customized service, any changes or additions to the products usually require a minimum order quantity.

Building a brand is a way to sustainable business, which may be a trend for dropshipping, so CJ is trying its best to help dropshippers to build up their brands. We have POD category and services like custom logo and packaging, and there is no MOQ limit for custom logo and many custom packages like gift boxes, paper bags, and mailing bags. For further information, you can watch our introduction videos or visit our website.

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