What if I told you that Jeff Bezos and Amazon.com began as a dropshipping business back in 1994? And what if I told you that the dropshipping market was projected to reach US$ 592 billion by 2027? In this article, you will learn what is dropshipping, why dropshipping has such a bad reputation, and you’ll find out if dropshipping can make you rich overnight.
If you’ve ever been interested in starting your own online business, you might have heard the term “dropshipping” thrown around. But what does it truly mean? What are the benefits? Is it a scam? And, most importantly, how can you make money with dropshipping?
In this article, we will try to answer all those questions and more, including:
- What is dropshipping and how does it work?
- What are the benefits of dropshipping?
- Dropshipping scams and the dark truth about fake gurus
- Can you get rich quick with dropshipping?
- Is dropshipping dead and is it still worth it?
What is Dropshipping and how does it work?
Dropshipping was first introduced around 1928 but lost momentum due to the Great Depression. Toyota then implemented a Just-In-Time (JIT) supply chain in the 1950s, and in 1994, Jeff Bezos and Amazon.com began as a dropshipping business. Today, 33% of online stores use dropshipping as a fulfillment model.
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party (supplier, wholesaler, manufacturer) and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly.
In short, dropshipping is the act of selling a product on your website without actually handling its fulfillment and shipping. Another key benefit of dropshipping is that you don’t pay for the product until the customer pays for it, making dropshipping an attractive option for people who don’t want to spend a lot on initial inventory or who don’t want to risk buying products that won’t sell. This low barrier to entry allows novices and professionals alike to pick a niche and run their own dropshipping-based ecommerce store.
What are the benefits of dropshipping?
Dropshipping is a great business model for aspiring entrepreneurs to start with because it’s accessible. With dropshipping, you can quickly test different business ideas with limited downside, which lets you learn a lot about how to choose and market in-demand products. Here are a few other reasons why dropshipping is such a popular model.
1. Easy to get started
Running an ecommerce business is much easier when you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:
- Managing or paying for a warehouse
- Packing and shipping your orders
- Tracking inventory for accounting reasons
- Handling returns and inbound shipments
- Continually ordering products and managing stock level
2. Less capital required & Lower risks
The biggest advantage to dropshipping is that it’s possible to launch an ecommerce store without having to invest thousands of dollars in inventory up front. Physical storefronts need large amounts of money before even opening their doors to purchase inventory, however with the drop shipping method; you do not buy the product, until a customer has made a purchase and you have been paid by the customer. This means low start-up costs and reduced risk.
3. Low-risk validation & Easier to test
Drop shipping uniquely offers the advantage of testing the waters before diving in. Dropshipping is a useful fulfillment method for both launching a new store and for business owners looking to test the appetite customers have for additional product categories, e.g., accessories or wholly new product lines. The main benefit of dropshipping is, again, the ability to list and potentially sell products without committing to buying a large amount of inventory.
4. Flexible location
A dropshipping business can be run from just about anywhere with an internet connection. As long as you are able to communicate with your suppliers and customers easily, you can run and manage your business from your dining table, or a pool bar in Phuket.
5. Diversity of products to sell
Since you don’t have to pre-purchase the items you sell, you can offer an array of trending products to your potential customers. If suppliers stock an item, you can list it for sale on your online store at no additional cost. With drop shipping you can ultimately sell as many different items as you want, at no extra cost. If you have the time to list them on your site, you have the ability to sell them.
6. Easier to scale
With drop shipping the majority of the work falls on the suppliers. Yes to get those sales will require work, but if your business unexpectedly doubles, your workload will not. Meaning less growing pains for you as you scale your business.
With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work. By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work.
Sales growth will always bring additional work—especially related to customer support—but businesses that utilize dropshipping scale particularly well relative to traditional ecommerce businesses.
Dropshipping scams and the dark truth about fake gurus
“You’ll be able to work from wherever, whenever!” they claim. “It’s easy to make money with dropshipping, you don’t need any skills, and there’s little risk involved!”
The term ‘dropshipping’ is often associated with scam. The scam is fake gurus selling dropshipping courses and telling people they don’t need any skills to become rich overnight. These are generally young people who aren’t making any money from dropshipping, but by selling courses.
Most of the people selling courses are regurgitating ideas they learned in a course. It is like the courses are copies of copies, getting worse quality content every level… But still sold for ‘high ticket’ pricing. Usually the fake gurus don’t have a ‘real business’ beyond selling you that one course. They have a rags-to-riches comeback story to lure in the customer (aka victim), then sell them on their lifestyle, which is a bunch of bullshit Instagram highlights of beaches, girls, sport cars, and money.
It’s just like any other MLM scam out there. Most “digital nomads” fell for the typical snake-oil charmer: Selling a course on how to sell a course to teach people about selling online courses.
If it sounds too good to be true, it probably is. There is certainly no blueprint who is going to show you step by step how to run a profitable business. People don’t hate dropshipping. They do however hate the dropshipping gurus and course sellers that mislead people.
Can you get rich quick with dropshipping?
It is a common belief that dropshipping is easy and a viable way to get rich quick. However, contrary to popular belief, dropshipping is not a get-rich-quick scheme.
Despite the ease with which you can list products for sale on your site, you will still need to attract the traffic for a meaningful conversion rate. It can take a substantial advertising budget and a lot of time to build a brand customers can trust.
The first and the most important key to success in Dropshipping is patience. Entrepreneurship goes hand in hand with being patient. It takes a lot of time to finally set up your store and earn money through it. You can not expect that money will start to flow magically as soon as you set up your store.
People usually run out of patience and quit before seeing a return on investment. There are no shortcuts in this business. There are Dropshipping gurus who make the Dropshipping model look as easy as possible when it requires a lot of time and efforts to have actual growth. It at least takes a couple of months to finally get profit from your Dropshipping store. You can’t expect it to be a two-day affair.
Can you get rich with dropshipping? Yes, regardless of the business model, if you bring value, and take the right actions, you can potentially make it to a very comfortable level. Can you get rich quick with dropshipping? The answer is simply no. The way that leads to financial success is certainly not an easy shortcut, as it requires time, hard work and skills.
Is dropshipping dead and is it still worth it?
Asking if dropshipping is dead is like asking if retail or e-commerce is dead. The short answer to this question is no. The days of the single product store on Shopify with Facebook ads are certainly over (the famous ‘winning product’), and you’ll certainly be faced with an overwhelming amount of competition, even within your niche.
The future of dropshipping, and e-commerce in general is bright. Even more so, since the pandemic caused by the Coronavirus, in 2020. People are buying massively online.
Dropshipping is just a fulfillment method, and regardless of the method, global e-commerce retail sales are projected to hit $4.9 trillion in 2021, and will account for 17.5% of the total global retail sales.