Is Dropshipping Worth it? A 2022 Guide

Is dropshipping worth it?

Dropshipping has become a very popular business model for launching a new business, and it’s easy to see why. There are many benefits to using a dropshipping model, but with all of the new entrants to the market, some are asking “is dropshipping worth it?”

In this article, we'll cover why we think that dropshipping is worth it, what the pros and cons are, and why you should consider launching a dropshipping business as your next side hustle venture.

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What is Dropshipping?

Dropshipping business model
Dropshipping business model – Your supplier ships the products directly to your customers

Before we get to dive in, let's first talk a little bit about what dropshipping is.

Essentially, dropshipping is just a business model that changes how a business owner handles inventory ownership and the fulfillment of orders.

In a dropshipping business, the business owner never holds inventory on their books. Instead, when a customer places an order for a product (or products), the business owner will then place an order with their supplier to ship directly to the customer.

This means that if you have a dropshipping business, you never have to invest capital in inventory. There's no risk of over-ordering product that doesn't sell well, and you don't have to manage the order fulfillment process that a normal business would.

Benefits of Dropshipping

Now, as we begin to explore the question “is dropshipping worth it“, let's dive into some of the benefits that you have as a dropshipping business. We've already briefly talked about the benefits of not holding inventory, but there are many more!

Let’s look at each one in a little more detail.

Dropshipping Businesses are Easy to Set Up

Is Dropshipping Worth it? At least it's easy to start!

If you're new to the dropshipping arena, this one might surprise you! It’s way easier than you likely think to set up a dropshipping business.

If you've already got your product idea, you can likely create a website and launch your new business within a few days.

Platforms like Shopify make it extremely easy to set up a website and source your product. Shopify offers easy integration with apps like Oberlo that will link you directly to suppliers for dropshipping.

Additionally, Shopify has tools that will help you create a website storefront that looks professionally made, with no coding skills needed. You can use additional tools like Canva, a free online graphic design tool, to create your logo and color scheme for your site also.

Is Dropshipping Worth it? Enjoy Low Startup Costs

Starting a dropshipping business, is it worth it? It's a low-cost business idea.

The startup costs with a new business following the traditional model can be very high.

With a normal retail business, you'll need to invest in inventory up front. You'll also likely need a storefront, which can be costly. There are also the other various overhead costs like employees to help support the different functions in a business, like order fulfillment.

With a dropshipping business, since you're not ever owning the inventory, you won’t need to invest a lot of capital upfront. Dropshipping businesses are operated online, so you won't be incurring a monthly rental cost either.

Lastly, with a dropshipping business, you can automate a lot of the functions that would normally be done by humans in a traditional business model. Order fulfillment is the biggest example of this. With a dropshipping business, you can have apps connected to your store that either partially or completely automate the order process with your suppliers.

No Inventory Holding Costs

You don't stock inventory in drop shipping

This is a benefit that we've touched on already, but as we mentioned earlier, with a dropshipping business model you don't ever take ownership of the inventory.

This saves an enormous amount of money, both in the startup phase of a business and ongoing holding costs that a traditional business would incur. In a traditional business model, you have to continually buy inventory month over month, season over season.

Inevitably, you'll eventually buy a product that doesn't sell as well as you predict. This will mean that you'll either need to hold the inventory or potentially discount it heavily, leading to lower profit margins for you or potentially even losing money.

Change Your Product Offering Easily

Closely related to the last benefit we mentioned, another pro of using a dropshipping model is that you can change up your product offering easily.

Because you don’t have to own any inventory in a dropshipping model, this means that you can change what products are sold in your store with just a few clicks.

Let’s say you have a cooking supply dropshipping store, and you want to test a new blender to see if it will sell well.

It’s very easy for you to find a supplier to source from, and add a blender to your store. You can see if it sells well, and if it does, great! But if it doesn't, you can take it off of your storefront with very little negative impact. You won’t have a ton of blenders sitting in a warehouse that you have to discount heavily to get rid of.

Dropshipping Can be Passive Income

Is dropshipping worth it? It's a way to get passive income for successful entrepreneurs

One of the main reasons that dropshipping appeals to many as a business model is the fact that the income can be totally passive.

However, likely in the first startup phase of launching a dropshipping business, it will not feel passive.

When you're first starting, you'll need to figure out how to set up everything. This ranges from your storefront, to how to source products from suppliers, how to drive traffic to your site, and more.

There's a fair amount of work to set everything up, but once you have a product that will sell well and everything set up to automatically fulfill the order, the income can become much more passive than a traditional business model.

Keep in mind that there will be an element of customer service in a dropshipping business. You'll have to handle customers' complaints, returns, and questions. Once you're established there are ways to outsource these activities, but likely at first, you'll want to handle this aspect of the business yourself.

Disadvantages of Dropshipping

By this point, we hope we've sold you on the answer to the question “is dropshipping worth it?

Our answer, of course, is a resounding yes.

However, we do want to mention some of the disadvantages of dropshipping also to make sure you're aware. The intention here is not to discourage you from starting a dropshipping business, but to ensure you're aware that dropshipping is not a get-rich-quick scheme.

As with a traditional business model, it will be a lot of hard work to figure everything out and set up your business to make some passive income.

Is Dropshipping Worth it? Competition is Steep

Competition is steep

Because of the many advantages of having a dropshipping business model, there is a lot of competition in the market. Additionally, with interest in side hustles growing ever since the pandemic hit, more and more people are trying dropshipping as an option than ever before.

This is not to discourage you, but just to caution you. When making your business plan, keep in mind how many people might be trying to sell the same product that you are. You'll need to differentiate yourself from your competition. This can be done either through marketing or through other aspects like price.

Oftentimes, with all of the competition in dropshipping, it can feel like a race to the bottom with price points. It can be very tempting to keep lowering your price to undercut your competition, but this will only go so far.

Be aware of your profit margins, as you can easily discount yourself to the point that you're not making much money on each sale.

Is Dropshipping Worth it? You Have Less Control

Bad quality drop shipping product

With all of the benefits that you get with dropshipping, there is an element of control that you give up compared to a traditional business model.

With a dropshipping model, you risk your supplier dropping your product totally or going out of business. This could mean that overnight one of your top sellers is not produced anymore.

Another risk is the quality of the product. Selecting a supplier that can produce consistent high-quality goods can be tricky. Especially when sourcing from websites like AliExpress, be sure to read reviews, contact the supplier, and even order samples to ensure your supplier can produce a high-quality product.

Dropshipping Profit Margins are Thin

is dropshipping worth it? You have to sell a lot because of low margins You

A lot of the processes in a dropshipping business are outsourced compared to a traditional business model.

Naturally, when you're ordering single orders at a time from a supplier, you're not getting as good of a price as a bulk wholesale order would get.

This can eat away at profit margins for a dropshipping business. Often in dropshipping, your profit margins will stay low so you're counting on enough volume in sales to make it a worthwhile business venture.

Conclusion: Is Dropshipping Worth it?

By now, we've covered the advantages and disadvantages of dropshipping, and what some of the risks are.

So that leaves the question: is dropshipping worth it? In our opinion, the answer is yes of course!

However, it’s important to be aware that starting a dropshipping business is hard work and not a get-rich-quick scheme.

Before you jump into dropshipping, be sure to do your research on both the business model and what products you want to offer in your store.

TIP | The leading tools you need to start and grow your online business:

  • Bluehost: Get 70% off Bluehost web hosting, the most popular web host powering over 2 million websites and officially recommended by WordPress.

  • Shopify: The leading eCommerce platform to easily build your online store, used by over 1.75 million entrepreneurs worldwide.

  • Teachable: Sell online courses in your knowledge business.

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