The development of e-commerce led to the rise of dropshipping model, which has gradually become a popular business model for entrepreneurs. Opening a dropshipping e-store with no inventory is more manageable with Shopify than ever.
But many people wonder if dropshipping is worthwhile. Is it still a feasible business model, or has it become too saturated? In this article, we will explore the world of Shopify dropshipping and examine if it is still a profitable venture.
We will look at the pros and cons of dropshipping, the challenges you may face, and the steps you can take to succeed in this competitive market. So, if you’re considering starting or running a dropshipping business, keep reading to find out if it’s still worth it in 2023.
Why Is Dropshipping So Popular?
The global dropshipping e-commerce market was worth US$128.6 billion in 2020 and will grow to US$476.1 billion between 2021 and 2026.
Dropshipping is a famous business model because it benefits both sellers and suppliers. One of its most potent advantages is that you don’t need space to keep inventory.
Additionally, managing sales and inventory is easy with helpful apps. Another perk is that you don’t have to think about logistics like packing or shipping because your vendor handles everything. Do you know you can start dropshipping for as little as $30?
With online business, you don’t need a physical storefront or warehouse. You can work from anywhere, like your living room or a coffee shop. Thousands of suppliers offer millions of products, providing endless opportunities.
Is Dropshipping Worth It – 3 Distinct Advantages
In this section, we will explain the three distinct advantages of dropshipping. We will detail each benefit to help you decide if dropshipping suits you.
Lean Operation
Running an online business and managing shipping can be challenging due to its complexity and expense.
You have to handle many tasks, including:
- Printing labels
- Packing materials
- Arranging pickup
- Updating customers
- Monitoring logistics providers’ performance
- Keep track of shipping rates.
But dropshipping is an excellent business model because it eliminates all shipping responsibilities. It allows you to concentrate on providing the utmost client satisfaction. Also, you focus on growing your business.
Product Diversification
Dropshipping is a business model allowing you to sell anything. You can choose to sell products you know and love.
If you want to maximize profits and scale faster, sell popular products. You can sell the following:
- Fast fashion items
- Toiletries
- Baby Clothing
- Homeware
- Smartphone accessories
- Water bottles.
Selling consumable items like fast fashion is a good idea as you can receive repeat orders from loyal customers. This versatility suits those who want to pursue many revenue streams.
Scalability
Dropshipping is a popular choice for expanding your business efficiently. To make it successful, you need a trustworthy supplier, regular updates to your online store, and good customer service.
You can replicate your success with one product by adding more goods to your online store.
Is Dropshipping Worth It – 3 Big Challenges?
Dropshipping has become famous in online stores. It allows you to have an online store without handling shipping or maintaining inventory. But this business model has challenges that you should consider.
We’ll discuss the three significant challenges of dropshipping. Also, we’ll help you determine if dropshipping is the right choice for your business.
Let’s explore the cons of this popular e-commerce model.
High Competitiveness
Entrepreneurs should focus on low overhead when starting a dropshipping business. They should also consider their competitors. Larger companies can offer lower prices. Thus, it’s challenging for small-scale companies to compete.
You might not have an exclusive supplier contract as a small business owner. Thus, you compete with more experienced competitors selling the same products. To succeed, you need more knowledge and resources to compete with them.
Thus, entrepreneurs should consider these factors. Potential customers may find the same products elsewhere for a lower price.
Fewer Products Control
Handling customer complaints in online selling is a simple task. But, if you’re dropshipping, you rely on your supplier to address these problems.
If your supplier cannot resolve them, your customers might become upset. They may express dissatisfaction on social media platforms. Others may read them and form negative opinions about how you deal with customer issues.
Enormous Supplier Challenges
The complaints from customers need your cooperation with the suppliers to resolve them.
A delay in order processing by a supplier can lead to delayed shipment to the customer. Thus, you need to keep track of the order with the supplier or direct the customer to the supplier for assistance.
Whenever a customer contacts you with a query, resolving the issue may take time as you need the necessary details. But, longer resolution times can result in customers exploring other options.
Tips for Dropshipping on Shopify
A successful dropshipping business needs more than setting up a store and importing products. For instance, what will you do if your supplier makes a mistake? How can you efficiently manage many suppliers and inventory? Read on to learn valuable tips to help you navigate dropshipping on Shopify.
What to Do When Your Supplier Errs
Suppliers can make mistakes, even the best ones. If you receive the wrong item or nothing from your supplier, here are three solutions:
- Own up to the problem, apologize, and update the customer on how you plan to fix it. It will show you are reliable.
- Depending on the mistake, offer the customer compensation. You can refund the shipping fee or give an upgrade. It shows you value your customers.
- Don’t worry about losing profit if a supplier errs. Reputable suppliers will pay for the error and cover the return shipping costs.
Freebies and upgrades to customers are costs attributable to public relations and brand-building. Mistakes can happen even with suitable suppliers, but seeking a more dependable vendor is wise if it becomes repetitive.
How to Manage Many Suppliers and Inventory
Managing inventory across several suppliers is the primary challenge of a dropshipping business. It is crucial to manage inventory and limit the number of out-of-stock items to ensure customer satisfaction and loyalty.
Follow these best practices for inventory management to reduce the number of out-of-stock items:
Use Several Suppliers
Access to many suppliers can be beneficial as it improves the order fulfillment ratio. If one supplier is out of stock, another may have it.
Relying on a single supplier is risky as it can affect the future of your business if they go out of business or decide not to partner with you. While two suppliers won’t have the same products, they will likely carry the bestselling items.
Choose Your Products
To have several options for fulfilling orders, try selling items carried by both suppliers. This strategy will increase your chances of successful sales.
You can interchange the suppliers if they have similar products. This practice is especially true for smaller accessories and add-ons. If you confirm their similarity, write a generic product description and list both model numbers in the model field.
This plan will allow you to meet the order from either vendor without making changes. But be careful not to substitute well-known brands like Nike or Bose.
Monitor and Deal with Stock Issues.
Ensure the products you intend to sell are consistently available. You shouldn’t carry items that the dropshipper has little stock at any time. You may face inventory issues if they often reorder them from the manufacturer.
If you can’t fill a customer’s order due to stock issues, offer a complimentary upgrade to maintain their satisfaction and loyalty. It’s better not to make money on the order than to lose the customer relationship entirely.
How to Choose the Right Supplier
To simplify the ordering process, having one preferred supplier with excellent service and a wide selection is best. You can easily automate the process using their email address as the default processor for every new confirmed order.
It’s crucial to ensure that your preferred supplier stocks most of the items you sell to avoid having to redirect orders frequently.
Using several suppliers who stock most of your products allows you to send the order to the closest supplier to your customer. This way, you expedite delivery, and your client saves on shipping fees.
Suppose you have an extensive product catalog spread across various suppliers. In that case, you must route each order based on the available stock. System automation is helpful if your vendors offer data feeds.
Automatically routing orders based on price may seem ideal. But it can be challenging to determine the cheapest supplier if their prices are not significantly different.
A reliable automated system must account for real-time shipping rates. It must also deal with potential drop fees and supplier pricing. Although it is not impossible, implementing an accurate automated system for this purpose can be difficult.
How to Start Dropshipping with Shopify?
And when it comes to setting up a dropshipping store, Shopify is undoubtedly one of the best platforms out there. But with so many available features and alternatives, it can be overwhelming for beginners to start.
This section will assist you in creating your Shopify dropshipping business. From choosing the right products to design and marketing, we’ll cover everything you need to know to get your store up and running.
So, if you’re ready to try and start a profitable dropshipping business, read on!
Having a Name for Your Store
Coming up with a name for your online store might seem daunting, but don’t worry – we’ll help with some handy tips.
First things first, keep it simple, be creative, and make it memorable. These three guidelines will help you craft a name that truly stands out. Shopify’s digital generator for business names can help brainstorm unique and creative names.
All you need to do is key in a word you’d like your business name to have, and voila! You’ll have a list of possible names to choose from.
Once you’ve narrowed down some ideas, you must ensure your chosen name is available. A quick Google search can help you know if there exists a .com domain for your preferred name. This way, you can avoid confusion and ensure an easily-identifiable brand.
And the best part? You don’t have to pay for the use of the Shopify business name generator! So, why are you dilly-dallying? Start creating the perfect name for your dropshipping store!
Create a Shopify Account
The process is super easy and will take a little of your time. You must head to Shopify’s homepage and tap “Start free trial.”
Afterward, you must pick a password and key in your email address. Remember to decide on a catchy name for your Shopify store! Then, you should enter your details and answer the questions about your digital store experience.
After completing the preliminaries, your Shopify account will be ready to roll. All that’s left is to finish the setup process to launch your dropshipping account.
Setup Your Store
This step ensures you’re ready to begin your e-commerce business.
Payment Information
First up, let’s talk about payment information. Setting up payments is essential for your Shopify store. Without it, you can’t receive customer payments.
To add payment information, choose the Payments tab after accessing Shopify’s Settings page. It’s super easy, and we recommend adding a PayPal account. If you don’t have one, don’t worry – signing up takes a few minutes.
Store Policies
Next, let’s talk about store policies. Ensure you have them before you launch your Shopify dropshipping store.
Use Shopify’s helpful tools for the following store policies:
- Standardized privacy policy
- Refund policy
- Terms and conditions
You can locate them on the Checkout tab after accessing Shopify’s settings. You’ll find the relevant fields at the end of the screen. Tap the Generate button, and you’re ready!
Shipping Rate
When managing your Shopify dropshipping store, transparent shipping rates become extremely important. You should offer free shipping as it’s the most straightforward option. But doing so can become confusing if you start providing different rates for different regions.
So, why not offer free shipping and include the shipping fee in the product price?
For instance, you want to sell a round-neck shirt for $20. Just increase the price to $25 and provide free shipping. Also, promoting “FREE SHIPPING!” in your Shopify store’s marketing will significantly enhance your sales.
Setting up free shipping on your Shopify store is a breeze. Go to your Shopify settings and locate the Shipping tab. Remove the domestic shipping zones. Then, in the Rest of World section, add “Free International Shipping.” Choose Free Shipping Rate from the Rate field, and you’re good to go!
Launch the Shopify Dropshipping Store
Awesome! You have all the crucial details to kick-start your Shopify dropshipping store. Now, let’s make it live and start selling! Head to your Shopify admin dashboard and click the “Sales Channels” tab.
Then, choose the “Add an online store” alternative, and voila! Your store is ready to roll.
Design the Dropshipping Store
Your store’s design should be eye-catching because customers see them first. Thus, you should make an outstanding first impression. Think of it as a shopper’s window that entices everyone to come in and browse.
To help you with your online store design, we have some easy tricks to boost your sales. And when it comes to designing your Shopify dropshipping store, there are two key things to keep in mind: your theme and logo.
Promote and Get Sales
Start earning cash with your Shopify dropshipping store! Don’t worry if you don’t have traffic yet. You can attract new customers by using marketing campaigns.
Check out the various marketing channels and research which will work best for your store. If you think Facebook advertising is your thing, test some campaigns.
Want to try TikTok or Instagram? Give it a shot! Keep experimenting until you find the best marketing mix for your Shopify business.
How Much Is the Monthly Fee for Shopify Dropshipping?
Shopify offers plans that cater to businesses of all sizes and budgets, making it highly scalable. Once your business grows, you can quickly shift to a higher-tier plan.
All plans come with the following features:
- 24/7 support
- Valuable tools for entrepreneurs
- Automatic updates for orders, products, and inventory.
The more advanced plans offer extra features such as the following:
- Shipping discounts
- Fraud analysis
- Language translation.
Shopify Starter
This subscription plan costs $5 per month plus 5% and 30¢ per transaction. It doesn’t offer a complete e-commerce website. You’ll only get basic features like payment acceptance and inventory management.
Shopify Starter is ideal for those who need to start selling but don’t need a comprehensive e-commerce website. You can use it to create a simple online store and sell through social and messaging apps such as Facebook Shop or Messenger.
You can also share your products through SMS, email, and other platforms.
Shopify Basic
This plan is the platform’s least expensive one, costing $39 monthly. It charges 2.9% and 30 cents for every transaction. Comparing Shopify Starter with Basic, the main difference is that Basic offers a complete e-commerce website.
Shopify Regular
To use the Shopify Regular plan, you must pay $105 monthly plus 2.6% and 30 cents per transaction.
You can opt for this plan if your e-commerce business needs the following:
- Professional reporting
- Five inventory locations
- Three to five staff accounts
- No actual computed shipping rates at the checkout
- A plan to sell items for the same prices when selling abroad.
But upgrading to Shopify Advanced is better if your store generates more than $110,000 in monthly sales. You’ll notice the 0.2% transaction fee difference.
Shopify Advanced
This plan costs $399/month and charges 2.4% and 30¢ per transaction.
It offers extra features such as:
- Advanced Reporting
- Up to eight inventory locations
- Six to 15 staff accounts
- Accurately computed shipping rates at checkout
- Ability to sell products for varying prices abroad.
Shopify Advanced may be your ideal solution if your business needs these features.
Shopify Plus
This Shopify plan is a high-level business solution starting at $2,000/month. It offers various benefits, including:
- Lower transaction fees
- A dedicated launch engineer
- A customized checkout experience.
For more complex business structures, the variable fee option is available.
Conclusion
Shopify dropshipping is still a worthy business idea. You can start small with little capital. Dropshipping has become popular in recent years as more people get into it.
To succeed in dropshipping, select the right products and ensure profitable margins. You must also partner with reliable suppliers. If you have more questions, you can rely on Globallyfulfill to help you.
