So, uh, is dropshipping worth it?
From supply chain issues to shifts in consumer behaviors, retail has weathered some rapid changes over the past two years.
Merchants now face rising costs associated with fuel, transportation, and other commodities—leading many to consider new avenues like dropshipping or print on demand.
But this begs the question, is dropshipping still worth it?
Below, we review some of the key facts about dropshipping, including why it’s so popular and what it takes to succeed as a dropshipper.
Read Also: How to start a business
Why is dropshipping so popular?
The biggest appeal: dropshipping is relatively easy to set up and doesn’t require a ton of upfront capital. Dropshipping is also an attractive option for established store owners, offering a low-risk way to test new products and scale business.
Other benefits include:
Offer a wider range of products. You can gain instant access to thousands, if not millions, of new products spanning categories like apparel, homeware, and even CBD products.
Expand inventory without increasing storage space. By outsourcing to a third party, you avoid the costs of storing products, hiring staff, and managing a warehouse(s).
Only pay for what you sell. Unlike a traditional retail model, you don’t have to purchase inventory in bulk prior to receiving orders.
Test new products with little risk. Experiment with new or trendy products without risking unsold inventory or additional labor costs; consumer preferences change constantly and quickly—dropshipping lets you refresh your product offerings just as quickly.
How profitable is dropshipping?
In terms of profitability, successful dropshippers will generally earn at least 20% to 30% profit on each item sold.
However, margins can vary depending on the products you sell. Some categories may be hyper-competitive, limiting how high you can set your price. Meanwhile, others may be less competitive but require a bigger marketing investment to get off the ground.
So, while every dropshipper has the potential to earn a profit, how much you profit will come down to your product choice and other costs. These include supplier fees, shipping fees, commission fees (e.g., if you choose to sell on a marketplace on Amazon), and marketing/advertising costs. Not to mention, you’ll likely need to invest in software and staff as your business grows, and you need a way to manage customer queries or automate various processes.
Why do dropshippers burn out?
Let’s not ignore the elephant in the room: though dropshipping offers a fast, seemingly stress-free way to get your business off the ground, starting a dropshipping business is no simple feat. In fact, top sellers estimate that only around 10% of dropshippers survive their first year.
As noted by one seller on Quora, “[Dropshipping seemed like] it would be like printing money!” But in reality, growing a dropshipping business required a big time commitment, a long-term plan, and a good grasp on numbers. Even after earning $1 million in sales within six months, the merchant ultimately closed his business. The stress of dealing with unhappy customers and keeping operations in check was more than he or his business partner bargained for.
Bottom line: The devil is in the details when it comes to dropshipping. It’s important to understand the challenges and potential roadblocks you may face before you face them, and to map out a strong strategy.
What does it take to succeed in dropshipping? 8 expert tips
With all that said, it’s entirely possible to start a dropshipping business that is both rewarding and profitable. Here are eight tips you’ll want to bear in mind before jumping head-first into this opportunity.
01. Pick an audience and product that you know well
There are tons of dropshipping products to choose from. It can be tempting to sell trendy items or interesting products that catch your eye at first glance. But like any type of business, you’ll need to know your product and audience inside-out to give yourself the best chance at anticipating (and serving) customer needs. For this reason, it’s best to pick a niche that you can already relate with, then hone in on a product you understand or are passionate about.
Note: you’ll want to be careful not to let your personal biases lead your decision-making. Make sure to do outside research, e.g., check social media, talk with potential customers, and study other products or businesses in your category. Get a clear, accurate understanding of the audience you want to serve. And, educate yourself on your product so that you can make sure that everything from your marketing messages to your customer service is on point.
02. Carefully vet your suppliers
When you’re just getting started, finding the right dropshipping suppliers is half the battle. By nature of the dropshipping model, you entrust a big portion of your business to your suppliers. Therefore, it pays to do your research, read online reviews, and talk to other store owners who can recommend reliable suppliers.
Look for suppliers with a good track record across things like product quality, on-time shipping, and communication. Check that they’re able to support a small volume of orders when you’re just staring out, as well as a larger volume as you grow.
One way to find reliable suppliers is through dropshipping platforms, such as Modalyst and Printify. Both connect you with a variety of suppliers that have been pre-vetted and are monitored for quality assurance.
03. Build a website that you're proud of
Having a strong online presence is essential for growing a successful, sustainable brand. Even if you plan on selling on marketplaces like Amazon or eBay, you should always create a website that represents your business the way that you want.
Use an eCommerce platform like Wix eCommerce to create a website from responsive, eCommerce website templates. Make sure to customize your store so that it reflects your unique branding and personality. In addition to great design, your website should be easy to navigate and feature high-quality photos and clear shipping information. Leverage the tools at your disposal to achieve the best user experience possible. This includes any integrated payment options, cross-selling features, and/or built-in SEO tools.
Another pro tip: Find a solution that integrates directly with your preferred dropshipping platform. This helps to simplify backend operations, which can get exponentially harder with every supplier and sales channel that you add. For example, Wix’s dropshipping solution enables you to automate inventory management and order routing, as well as keep product data synced across all of your channels.
04. Give your product descriptions proper TLC
Avoid copying and pasting generic, manufacturer-provided descriptions. Rather, use your product descriptions to differentiate your brand. Explain the features and benefits of your products in a way that’s persuasive, yet accurate. If you're not sure where to start, look at some of the best product descriptions for inspiration and test different approaches.
Also, keep in mind that having thoughtful, unique descriptions is beneficial to SEO. Search engines reward rich descriptions that engage site visitors, and conversely penalize pages with duplicate content or content that’s too thin.
05. Offer competitive pricing without over-relying on it
Do not compete on price alone, but remember that your prices still need to be low enough to attract shoppers, yet high enough to make a profit. This can be a delicate balance to strike. However, there are some pricing strategies that can work in your favor.
When pricing your products for dropshipping, consider things like:
Bundle pricing - Selling a group of similar products together at a per-unit discount
Penetration pricing - Launching products at a low introductory price to attract shoppers, and potentially raising prices later once you’ve established your brand
Milking - Launching products at a high price, then gradually reducing your price over time
Pay close attention to how much and how often you discount items, since profit margin may already be slim, particularly for lower cost items. The trick is to find a good balance of price, demand, and competitiveness.
06. Promote your products—and your store—effectively
Marketing is a core part of growing a dropshipping business. In order to avoid over-relying on pricing to win a sale, you must have a strong plan for branding and promoting your store.
There are many eCommerce marketing strategies you can use to promote your dropshipping business. Among them: paid ads on channels like Google and Facebook that can help to broaden your reach immediately.
In the long-term though, you’ll benefit from having a strong organic marketing strategy that doesn’t require you to cough up money to continue seeing results. This entail investing in efforts like:
Optimizing your product and category pages for search engines
Crafting compelling social media posts
Building relationships with brand ambassadors
Implementing loyalty programs that incentivize customers to make repeat purchases
Developing a strong email or SMS marketing strategy for staying in touch with customers
All the while, remember that you're not just marketing a product; you're marketing your brand and the values you represent. Think of what sets your entire business apart, and use that to your advantage.
07. Be transparent and provide excellent customer service
This step is especially important when you’re a dropshipper because you don’t have control over every step of the fulfillment process.
Set the right expectations with customers early on by letting them know when they should expect their orders. Maintain communication throughout the shipping process, particularly when there are delays. Provide tracking information that shoppers can see exactly where their orders are once your suppliers have shipped them out.
In addition to timely delivery, today’s shoppers expect a high level of customer service. Make yourself available to customer queries and respond quickly to their issues. Offer a transparent and easy-to-understand return/exchange policy, and provide helpful (plus relevant) product recommendations. Make sure you work with a reliable supplier who can support your customer service standards.
08. Test, refine, and test again
The only way to know what works and what doesn't is to test everything, including your marketing strategies, your prices, your product selection, and more. Run thoughtful A/B tests and make decisions based on real data.
Wix Analytics provides insight into sales performance on a channel-by-channel or product-by-product basis. You can use various reports to drill into visitor behaviors, plus glean a better understanding as to what drives people to take action on your site.
Thanks to the flexibility of the dropshipping model, you can swap out, update, and expand your product catalog with minimal risk. So, don't shy away from testing new products. It’s important to continuously experiment, refine, and improve different aspects of your business so you can optimize your results.
So, is dropshipping still worth it?
If you ask us, yes. Dropshipping is still worth it.
However, it’s not for everyone. If you’re looking for a get-rich-quick-scheme, you may be disappointed to learn that dropshipping still requires a lot of hands-on work to build into a million-dollar venture.
On the other hand, if you’re ready to grab eCommerce by the horns (see our guide on what is eCommerce), you can enjoy the rewards of hard, honest work without having to do everything on your own.
Test it out for yourself and see the results you can achieve using Wix’s dropshipping solution. Simplify the process of creating an online store and finding dropshipping suppliers with our easy-to-use eCommerce tools. Try Wix eCommerce for free today.
Editor, Wix eCommerce
Allison is the editor for the Wix eCommerce blog, with several years of experience reporting on eCommerce news, strategies, and founder stories.