With lots of other e-commerce ventures coming to the fore in recent times, one is forced to question the profitability of the dropshipping business. An analysis of popular search engines such as Google showed that people have continued to ask the question “is dropshipping profitable”. In this article, we will attempt to answer this question, highlighting the requirements for the success of the business.
For a newbie in the business, it seems a bit too fanciful and too good to be true that you can make money (and lots of it, at that) without having a physical store, packing, and delivering products. However, many people have made lots of profits from the dropshipping business model.
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This then gives us a short and precise answer to the question. Yes, dropshipping can be profitable, given the condition that you follow the requirements and put in enough hard work. In the succeeding sections, we will discuss what dropshipping is and do a detailed analysis of the requirements for a dropshipping business.
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What is Dropshipping?
Dropshipping is a type of e-commerce business that involves selling products through an online store without having to store, package or deliver the products. Here is how it works. When a person sees a product they like on your dropshipping websites or online store, they make an order.
You (the dropshipper) receive the order and forward it to the supplier or original distributor of the product. The supplier fulfills the order, and you get your cut from the proceedings.
As simple as it sounds, reality has shown that many people fail in the dropshipping industry due to their failure to follow through on certain requirements that determine the success and profitability of the process. The following are some of the requirements for a profitable dropshipping business:
Choose the Ideal E-Commerce Platform
As a dropshipper, you have no physical store. Your online store is the only means of putting your products out there for people to see and buy. This is why you need to ensure that the website or online store used to display your product is one of the best around.
Many e-commerce platforms allow you to create a dropshipping store or website. However, the most popular ones are Shopify and WooCommerce. Both of these platforms have been popular with dropshippers for years, and this article will focus on them.
Shopify makes the process of creating a dropshipping website easy and fast. For a monthly subscription fee, about $29/month for a basic plan, you can set up your store and this comes with an SSL Certificate and a web hosting service as they are a SaaS (Software as a Service). You also have to pay the credit card rate as well as the transaction fee especially if you are not using Shopify Payments.
It is important to state that these features come with a basic plan. However, you do not get other third-party apps for free, and these apps help grow the online store.
For more functionality and access to additional reporting/analytics features, team members, and lower transaction costs, you can opt for higher plans such as the Shopify Plan which comes at $79 per month, or the Advanced Shopify plan which comes at $299 per month.
WooCommerce is the other popular e-commerce platform that eases the process of creating a dropshipping website. The platform comes as a plugin for WordPress websites. This means that if you are using a WordPress website, all you need to do is install the plugin and you are ready to go.
However, to make the platform or plugin functional, you need to buy a domain name and a WordPress Hosting Account. All of these come at a lower price when purchased in bulk under the Managed WooCommerce Hosting service, rather than buying them individually.
WooCommerce is a good option too because it gives you ownership, you are the owner of your store, and nobody can shut you down. We cover the pros and cons of Shopify versus WooCommerce in our advanced guide.
You may also want to consider the hosting service that you choose as it determines the scalability of the online store. Scalability refers to the ability of the platform to handle increased demands and workload and this feature is very important when the online store becomes bigger and processes lots of orders in a day. This increased traffic can shut down the store if the store was not scalable.
Is Dropshipping Profitable? Set the Right Price
After getting the ideal platform for your online store, getting the right products to sell, and getting a dropshipping supplier, the new line of action is to get the price right. The price set on the product largely determines whether or not your dropshipping business will be profitable or not.
To set the right price for your products, you need to consider your profit margin and sales tax. The profit margin is the difference between what you are paying to get the goods and the price you are selling. Depending on the type of goods you sell, you can decide to work your profits in different ways.
For instance, you can decide to double the price of a t-shirt bought at $5 at wholesale and sell it for $10, people would still be able to afford and buy the product. However, you cannot do the same thing for an electronic gadget sold at $700 wholesale.
If you live in the US, you may have to worry about sales tax, or shipping fees, as your supplier will charge you for shipping the product to the buyer.
Is Dropshipping Profitable? Advertise Your Products
It has been said that dropshipping revolves around two things; products and marketing. Once you get these two right, there is no telling how far you would go in the dropshipping business. Thus, you need to pay lots of attention to your marketing and advertising efforts.
There are many methods or ways through which you can establish an effective marketing effort for your goods. You can use an email marketing approach where you use an email list generated from your buyers to build loyal and lasting customers.
You can also use social media platforms and search engines for your marketing efforts. Companies such as Facebook and Google have the capabilities to run ads on their platform at your targeted users.
Conclusion – Is Dropshipping Profitable?
Dropshipping can be profitable, as we have seen a lot of people make a thriving business out of it. However, its profitability depends on the readiness to put in the required effort and follow through with requirements.