We live in the digital era where everything needs to happen fast and we have to do all of our tasks and work in an efficient manner. No area of business is an exception, especially not the online businesses. In recent years, these online stores have adapted to something called drop shipping. In case you’re not familiar with this term, the concept of drop shipping implies the fact that companies are able to operate without having to hold inventory.
So how is that possible? Well, an owner of a company can team up with a third party that can manufacture products, keep them in a warehouse, pack them, and ship them to people around the world. Basically, that means the merchant that a client buys a product from, doesn’t actually see or handle that product in any way.
In this article, we will discuss whether the drop shipping method used by online companies is still a viable business model today or not:
Disadvantages Exist
The idea of drop shipping sounds very appealing indeed, but just like any other type of business, this one has its disadvantages too. After all, if you want to succeed in any industry, it’s definitely not going to be easy.
Maybe the most obvious one is also the one that makes this type of business so appealing. The fact that the owner of the business doesn’t actually know what kind of products he is selling can be a big drawback. Of course, it sounds really great to just make the transaction between a client and a third party, without having to worry about packaging and shipping. Or does it? If you think about it, if something goes wrong with an order, the owner has no control over how it happens or how the situation is being handled. So basically, the owner has to rely completely on the supplier’s business viability.
Another disadvantage that comes with handling a business based on dropshipping, is the fact that an owner will have to pay more than he would for wholesale prices. And it’s pretty normal for things to be that way, given the fact that the supplier needs to charge for many things like warehousing, staff, insurance, and many other factors that keep the business going. Generally, merchandise that is either high-volume or high-margin should be considered for drop shipping first and foremost.
How Much Does It Cost?
The main reason why more and more people are getting into businesses based on dropshipping is that they can be implemented with almost no money at all, especially if you compare this business model with others. In the beginning, everything is great and you barely spend any money in order to make money, but as the business grows, the costs that come with maintaining it are more likely to increase as well.
First and foremost, you will need to implement a website for your business, and this part can be crucial. After all, this is how all of the best drop shipping companies have started. Maybe the most common and at the same time the best way to get things going is by using Shopify, which will take $29 from your bank account every month. Next up is the domain, which can have prices as low as $2.95 per month.
Other additional costs that might come up are:
- a drop shipping automation app – $29.90 per month.
- a currency localizer – $9.99 per year.
- a tax calculation and reporting ap – $47 per month.
Going Professional
If you think that your business is going great and you think about taking things to a new level, you should start investing more. For example, you can invest in an app that offers free trust seals and review generation tools, for a fee of $39.99 per month. Also, you might want to consider investing in promoting your business via services like MailChimp, which will only cost you $10 per month.
All these numbers might seem a little too much for one such business, but it is important to remember that all of these apps and tools are meant to grow your business. And if you can take the thing to the point where you are able to pay for all of these tools with money from your own online company, they’re all definitely worth it.
There are definitely a ton of things that you have to consider before making the decision to start a business based on the drop-shipping model. It’s not going to be the easiest process on the planet and it can definitely give you some headaches. However, if you’re able to find the right suppliers, to create a great forefront that will attract customers and learn how to handle the logistics behind the actual operations, the dropshipping business model can definitely be a viable one in 2018, just like it has proven to be in the past years.
