Is “Dropshipping” good or bad for beginners?
Dropshipping gained popularity in 2006 for the first time on the internet with Ali Express making a name in E-commerce. However, 14 years after, it is still a promising business and people are earning great amounts of money in 2020 as well. But the real question is should you as a beginner, with no experience managing sales or anything, get into the business of dropshipping? The answer in simple words is a big ‘’NO’’.

We will get into the main reasons for this but first beginners should understand what the Dropshipping business model is.

Dropshipping Business Model

Dropshipping Business Model Creator: VectorMine | Credit: Getty Images/iStockphoto

Dropshipping is a business model in which you run a store without holding any inventory and once a customer has ordered something from your store, your supplier will pack, and ship that order to the customer’s address without you having to worry about packaging, storing or shipping, while you end up making a profit over that sale made.

Why Beginners should avoid Dropshipping?

There are 3 big reasons why beginners should avoid dropshipping.

· Not Beginner friendly

Dropshipping is not as easy as many dropshippers claim it to be, for beginners. Many dropshippers pitch this business model to attract people who are low on budget or have a weak financial background. It is true that dropshipping is one of the cheapest forms of Business setup that requires minimal startup but it still requires a startup. When we say startup we are talking about a minimum of $1000. Many beginners believe that all you need is a subscription for opening an online store and a few apps to run it smoothly and that can be covered with as low as $100 a month on some platforms but this is not true. Opening an online store is one thing, and making a sale is another, and those sales require advertisements which is another topic in itself. To be honest if someone has no experience running and testing ads online, like majority of the beginners really don’t have, then even $3000 might not be enough to start with. To start dropshiping online, you have to run online ads. There are a number of platforms that provide the ad services. Facebook ads, Google ads, Instagram Ads are among the most popular examples of such platforms. Each platform produces different results through advertisements. So you should know how to spend, how much to spend, and what to spend on. The more knowledge you have the greater your reach to audience will be with minimum expenditure.

· Hiring May be Necessary

Another misconception among the beginners about dropshipping is that all they need is an online store and the rest is handled by the suppliers. Beginners believe they only have to initially import products and that’s it, which is absolutely wrong. Though the supplier handles the majority of the stuff, but beginner being owner of the store is still customer’s point of contact. Let’s assume that you as beginner are using order fulfilling app, and order tracking app and other important apps with a fully automated system you would still need some virtual assistant to handle your customer support, and you have to be responsible for any cancelled order or anything that goes wrong. This is because your customer will contact you, not the real supplier who shipped the package on your behalf, in case anything goes south. And for something like this a beginner needs to have some experience in tackling situations like these or at least has to be prepared for such mishaps. In order to maintain integrity and reputation of the store, you should be responsive and act swiftly to make things right with the customer.

· Low Profit Margins

Whenever someone is pitching dropshipping as a business option for beginners, they attract people to get into this because they are earning huge amounts of money with dropshipping. They show revenues as high as $50,000 or 80,000 or even more with dropshipping. It is true they may be earning that amount but when you look deep into it and look at the profit they make in that revenue, it accounts for 12 to 16% of the total revenue which is pretty low. And to get to a point where you generate about $50,000 as a revenue over total sales made, you need to have enough in your pocket to spend on ads. Now you have to pay your virtual assistant and taxes with the profits you ve earned. When you take all the expenses into account, you don’t end up earning the amount you wanted in the first place.

Conclusion

There is no doubt that dropshipping is a great business and that there are people actually making more than enough out of it but this business model is not suitable for beginners. Every beginner who may want to get into dropshipping should ask these questions from himself. Am I experienced in running ads online? Am I experienced in managing assistants for work? Do I have any knowledge about keeping up with the customers? How long can I afford to keep the business up and running without making any sale? If you have some experience regarding the customer support service and you have a minimum of about $1000 and you have enough knowledge to run ads online and test different products with the ads, then you should give it a try. There are people who have made sales of millions of dollars in a month and have earned more than $1,00,000 in profits. But they have spent years getting there. However, if you are a Beginner or want to start something risk free and with absolutely nothing then you can start by getting into Print on Demand. This business model is highly suitable for people who can start for absolutely free and does not require paid advertisements. It is not a get rich quick scheme but it will be passive for sure. If you want to know how to get started with print on demand business then follow me, my next article would be “How to get started with Print on Demand Business Model’’.
['Saad Iqbal']
['Dropshipping', 'Beginners Guide', 'Business Model', 'Hustle', 'Online Business']