If you’re an entrepreneur looking to make money online and explored multiple avenues you’ve probably come across dropshipping. It is often touted as an easy business model due to its low start-up costs which draws in beginners. While it’s true that there are opportunities in dropshipping, success isn’t as easy as many would have you believe. The ones that are most successful have already developed real skills by studying business courses and finding the best online MBA in Australia gaining knowledge ahead of the pack. This article will look at why you should concentrate on building real sustainable businesses rather than the quick-fix approach in dropshipping.
The Business Model of Dropshipping
The dropshipping business model has gained lots of traction in recent years and was specifically brought about during the pandemic when many customers were forced to shop online. Essentially it involves the retailer marketing and selling products but instead of stocking the items themselves, they send the orders to a supplier to fulfil and ship to customers. It isn’t necessarily a new model as many physical retailers sell items from third-party suppliers as a form of arbitrage but the online economy makes the model much more accessible to the general population.
The biggest advantage of this model is that it eliminates the need for upfront investment in inventory, warehousing, and logistics. It also allows entrepreneurs to stock wider ranges of products without massive investments meaning it’s possible to test out items without too much risk. These are some of the drawcards to this business model and it makes sense why so many people are flocking to try it out themselves.
Disadvantages of Dropshipping
While dropshipping presents a great opportunity, some key issues separate it from established companies in the business world. Let’s take a look at some of the disadvantages.
No Control Over Pricing
The major disadvantage is having little control over pricing. Since the supplier sets the prices margins can be extremely small especially when you start to add marketing costs, shipping costs and other expenses. It means that while it’s easy to get started the profitability over time might start to suffer.
Inventory Management
Inventory management poses another challenge. Relying on a third party for stock means that you have less control over supply and demand. Many drop shippers may have issues fulfilling their orders if they experience excessive demand.
Long Shipping Times
Another major issue can be shipping times, because many of these items are shipped from suppliers in China and sold in Western markets it means that shipping can take anywhere up to 2 months. This can decrease consumer confidence and put a strain on your business.
Highly Competitive Industry
While dropshipping stores can be easy to start, the low barrier for entry also means more competition. If you’re not sourcing competitive suppliers, getting solid marketing strategies and having detailed business plans you might be setting yourself up for failure.
The Difference Between Building Your Own Business and Dropshipping
If you’re thinking of starting a dropshipping store you need to look at it as a real business as opposed to a get-rich-quick method. The ones who build real businesses in the long term will always prosper over those looking for the next best thing.
Real Brands Are Trusted
If you build your brand and business over the long term you are going to be trusted more than newer brands using the dropship model that builds overnight. If we look at all the largest companies in the world today they are all big brands that have built their reputation over decades.
You’re In Control
If you build your own business you can make sure that you have control over your branding, inventory management, customer service, shipping and more. This means if something goes wrong you can handle it quickly and efficiently while issues through dropshipping may be harder to resolve.
Set Yourself Apart in the Market
By building your own business you have the opportunity to create a unique offering that sets you apart from all other drop-shippers in the market. If you’re limited to products found from suppliers on the other side of the world there is nothing too unique you can offer, meaning it lowers the chance for success.
Takeaways
When it comes to starting an online business, it’s easy to get caught up in the excitement of dropshipping. But remember that no business model is truly a get-rich-quick way to success, like anything it requires effort and long-term commitment. This doesn’t mean that the dropshipping model doesn’t work but don’t expect success to happen overnight. If you’re in this mentality then you’re better off developing businesses for the long term instead. Good luck.
