The Benefits of Starting a Dropshipping Business
Are you thinking about starting an online business but don’t have the capital for inventory or warehousing? Dropshipping may be the ideal solution. Dropshipping allows you to sell products online without keeping stock on hand. When a customer places an order, you purchase the item from a third party and have it shipped directly to the customer.
This hands-off fulfillment method comes with many advantages for new ecommerce entrepreneurs. Read on to learn the key benefits of starting a dropshipping business.
Low Startup Costs
The biggest appeal of dropshipping is the low barrier to entry. With traditional ecommerce, you need to invest thousands upfront in inventory. But with dropshipping, you can open your online store without this large capital investment.
Without having to pre-purchase and store products, you can launch your business for less than $100. All you need is a laptop, internet connection, web hosting, and a dropshipping supplier. This makes dropshipping ideal for bootstrapped entrepreneurs and side hustlers looking to test a business idea.
If the business doesn’t work out, your losses are minimal. But if it succeeds, the profits can be immense compared to the low startup costs. Dropshipping lets you get your foot in the ecommerce door for a fraction of the typical cost.
Easy Scalability
Another major benefit of dropshipping is easy scalability. As your business grows, you can scale up without major investments. Again, because you don’t stock inventory, you don’t need more warehousing space and labor to support expansion.
You also don’t have to deal with tied-up cash from massive inventory orders. Your supplier stocks, packages, and ships each order as it comes in. This gives you the flexibility to grow sales exponentially without logistical bottlenecks.
With traditional ecommerce, scaling too quickly can overwhelm your operations. But dropshipping’s lean fulfillment method lets you expand your product catalog and sales at will. If a product takes off, you can ride the viral momentum without capacity constraints. This agility helps you maximize opportunities for growth.
Low Overhead Costs
In addition to minimal startup costs, dropshipping means keeping your ongoing overhead expenses low. Again, because you don’t have to manage physical products in a warehouse, you avoid those hefty operational costs.
Expenses like rent, storage, equipment, and labor add up fast in traditional ecommerce. With dropshipping, those costs are outsourced to your supplier and distributor. Your only real overhead costs are marketing, customer service, and the dropshipping fees.
This lean overhead structure increases your chances of running a profitable business. You get to devote more revenue to critical growth areas like marketing instead of just keeping the lights on. Lower fixed costs also reduce your breakeven point so your business becomes profitable faster.
Minimal Risk
Compared to traditional retail, a dropshipping model carries less risk. As mentioned, your upfront investment is minimal. You also don’t have to worry about getting stuck with excess inventory that you can’t sell. With dropshipping, you only order items after they’ve been purchased by a customer. There’s little risk of deadstock accumulating and tying up your working capital.
Because you don’t own the inventory, returns and fraud are also less of an issue. Your supplier handles defective merchandise and refunds. This saves you headaches down the road if issues arise. The overall minimal risk gives you more confidence to start a dropshipping store versus other more capital-intensive ecommerce models.
Location Independence
Another benefit of dropshipping is you can run your business from anywhere with an internet connection. You don’t have to be close to a warehouse or facilities. The day-to-day of managing a dropshipping store can be done remotely.
This location independence offers entrepreneurs great flexibility. You could run your online store while travelling the world or from the comfort of home. Some sellers even operate stores while working a separate full-time job. The hands-off logistics of dropshipping facilitate a portable lifestyle.
Easy to Automate
Due to the streamlined operations, dropshipping businesses are easy to automate. After the store setup, most of the repetitive tasks can be automated. This includes order processing, customer service, and marketing activities. Automation solutions like Oberlo for Shopify help minimize the manual work needed to run a dropshipping business.
With automation, you can essentially run an ecommerce store in your spare time. The automation software handles the busywork so you can focus on high-level strategizing and growth. This is appealing for entrepreneurs who want the benefits of an online business without the headache of dailyoperations.
Wider Product Selection
Compared to carrying your own inventory, dropshipping gives you access to a much wider catalog of products. Instead of stocking a few hundred SKUs in a warehouse, you can offer thousands of dropshipped products in your online store.
Because you’re pulling from multiple supplier warehouses, your virtual inventory is endless. If you can sell it and your supplier stocks it, you can add it to your product lineup. This extensive selection makes it easier to meet customer needs under one roof.
No Need to Handle Physical Products
If you dread handling and shipping physical products, dropshipping keeps your online business 100% digital. You never have to touch the inventory, package orders, or haul boxes to the post office. Your entire job is managing the online storefront and branding.
Many entrepreneurs prefer this hands-off dynamic. You get the benefits of running a commerce business without the logistical hassles. The supplier handles purchasing, packaging, and shipping the products. All you do is connect the customer with the merchandise through your digital platform.
Dropshipping also eliminates steps in the value chain like quality control and returns handling. For the product-averse, dropshipping provides an attractive alternative to other ecommerce models.
Built-in Supplier Relationships
When you launch a dropshipping store, suppliers provide the product catalog and fulfillment. This gives you access to an established supply chain without having to build relationships from scratch. Because the dropshipper handles procurement and shipping, your business has built-in support.
With your own warehouse and inventory, you’d have to find suppliers, negotiate terms, handle logistics, etc. But dropshipping suppliers provide ready-made infrastructure. You get to focus on marketing and storefront branding while they execute behind the scenes. This symbiotic relationship with suppliers lets you get to market faster.
Lower Risk of Excess Inventory
Excess inventory is one of the biggest risks facing ecommerce businesses. You invest thousands in products only to have them pile up unsold in the warehouse. With dropshipping, the supplier handles inventory management. They store the products until an order comes through.
Because you only buy inventory as needed to fulfill orders, there is little risk of deadstock. The supplier takes on the risk of stocking too much. If a product drops in popularity, you simply remove it from your online catalog. The flexibility of on-demand inventory reduces the headaches of managing surplus products taking up space and cash.
Focus on Customer Acquisition
Without juggling the complexities of operating a warehouse, fulfilling orders, and managing inventory, dropshipping lets you concentrate on customer acquisition. You get to devote your energy to marketing, branding, and driving sales.
Inventory management is off your plate. The plug-and-play fulfillment system gives you time to focus on business growth rather than operations. For entrepreneurs who enjoy strategic marketing more than tactical shipping logistics, dropshipping provides a welcome service.
Low Commitment
For new entrepreneurs, dropshipping offers a low-commitment way to validate a business idea without excessive risk. Because startup costs are minimal, you can quickly launch a store and see if your concept resonates before investing more. If the store fails, you pull the plug without losing much.
This low barrier to entry allows for fast experimentation. You get to test products, marketing channels, and target segments without heavy operational investments upfront. Dropshipping provides an ideal launchpad to refine your business model while limiting financial risk. The low commitment helps take the scariness out of starting an online business.
Accepts Multiple Sales Channels
With a dropshipping model, you’re not limited to selling through your own independent storefront. You can list your dropshipped products on multiple channels like Amazon, eBay, and Walmart. This multi-channel strategy helps you maximize exposure and sales.
These third-party marketplaces already have huge built-in audiences. Listing your products there provides instant access to millions of additional customers. And you still fulfill orders through dropshipping so you don’t have to carry added inventory. The flexibility to sell across channels amplifies your reach.
No Need to Develop Products
Product research and development can be challenging. With dropshipping, your suppliers already created the products. You simply choose items from their catalog to market and sell. This saves you from investing months of R&D into designing, prototyping, and manufacturing your own products.
Instead of developing something from scratch, you get to piggyback off existing products that are already selling. Let the supplier handle turning an idea into reality. You benefit by selling a proven commodity without the headaches of product development.
Overall, the advantages of dropshipping provide a remarkably accessible and low-risk path to ecommerce business ownership. By leveraging dropshipping suppliers for fulfillment, you can get an online store up and running in almost no time with little investment.
You also minimize overhead costs and risks associated with managing your own inventory. At its core, dropshipping provides an incredible opportunity for entrepreneurs. You get to own an exciting online business without dealing with logistical hurdles and barriers to entry.
What are you waiting for? Research suppliers, pick a niche, and start building your dropshipping empire today. The benefits outlined above make dropshipping a near turnkey business model for aspiring ecommerce entrepreneurs.
