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There is no question whether drop shipping is legit business model or not. It is legit, pretty common and many people are doing it. Some successfully, and some not, but you need to know all about challenges related to it before you can decide if it is a suitable business model for you.
I have been doing it myself few years ago and quit before I ever made any money. Why? Well , this is what this article is all about, so let me explain it, step by step.
But first, for those who are not yet familiar with the concept, the question is – what is drop shipping?
Take a regular retail business(store) as example. Every store have products on its shells, right? Those products come from wholesalers or/and manufacturers.
But drop shipping is a business model where the retailer, in this case you or anyone else who starts this business, do not handle or keep the products it sells like a regular store. You sell the item to the customer and then you purchase it from the supplier who also ships the product to the customer.
With this model some of the advantages are obvious, but there are some challenges that need to be addressed properly in order to make this business work without much headache.
Pros of this business
Pros of this business are many. If you consider the usual situation that every retailer face in regular business, you avoid all these difficulties and most of expenses. You do not have to worry about:
– Accumulating products and the storage
– Ordering products
– Location and rent
– Keeping inventory for accounting reasons
– Handling shipments and returns
It is very easy to get started and almost no capital is required. It is done from anywhere, as long as you have internet connection and contact with the suppliers. It is very suitable work-from-home business model.
Cons of this business
Well, pros look good but it is not all that easy to do, and you definitely need to consider disadvantages as well. let me explain one at the time, and also explain why I quit before I even started doing it seriously.
– Low margin and overwhelming competition
These two things go together and are closely related. Since it is so easy to get started, many people took the opportunity so the markets got over saturated. The fact that the initial investment is practically non-existent, people can afford to sell products for extremely low margin.
Of course, all in order to jump start the business as quickly as possible, but this also ruins the whole concept for everybody. So, if you get to this business and do the research, as I was supposed to do before I started, you will discover that it is almost impossible to sell product for a certain price without having a competitors who are offering it even cheaper.
That is the big problem with this business!
– Multiple suppliers and shipping problems
When you start this business, just like with any other online business, you must have website and choose your niche. You will most likely do business with several suppliers in order to set up a certain variety of products. That is not problem free area.
Every supplier have their own way of contacting them and placing orders. Few years ago when I tried this business, most drop-ship companies(not every company does drop shipping) were from US, over 90% of them. That is besides the point here, but I had problems with complying to so many rules of conduct.
Not every supplier could be contacted by phone and orders sometimes get misplaced. If you sell those products on Ebay, you have negative feedback to face if that happens. You did nothing wrong but suppliers sometimes make mistake and you get the penalty.
– Finding good products
When I started that business I wanted to get into music equipment niche and collect a set of products to sell within that category. It turned out to be impossible thing to do. Although those products where available from many suppliers, they where from unknown manufacturer and brand.
I was not sure how those would perform, while in the same time competitors could offer those good brand products for a very good price. It was the same with other few back-up niches I had in mind.
I do not know how the market changed since I was involved with it, but I used GoGo drop-ship directory that had a biggest list of suppliers on the market at that time. I spent hours and hours trying to work something out but I never made it, and I lost money on the deal too, cause GoGo is not free. Finally I dropped everything and focused on affiliate programs instead, which I think is way better thing to work with than drop shipping.
This is the reality with drop shipping. The way I saw it and experienced it, I can not recommend it, even though it is a legit business model and possibility. Or maybe the truth was that I was not patient enough to make something out of it.
There are many people who do that successfully so I personally have to consider that, but I did invest a lot of time in it and got nowhere.
I think that cons are stronger than pros in this case, which was the reason I quit. Nevertheless, you know now exactly what you would be dealing with if you start drop shipping business, so you can decide whether it is something for you to do, or not.
If I may, I would like to recommend to you another business model, and that is affiliate marketing. You will need education in order to do it successfully, but it is so much better way of doing business online than drop shipping. In fact, it is THE BEST online business model there is. The education is provided by Wealthy Affiliate, but I would suggest you to start investigating this by reading this article first.
If you have any comments or anything to share, please leave it below!
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