Is Drop Shipping Profitable?
March 25, 2024
Drop shipping is a modern, convenient, and streamlined eCommerce model where you don’t have to physically deal with your stock or inventory.
But, as attractive a concept as it may be, there’s something you should ask yourself before diving in: is drop shipping profitable?
The Asia-Pacific drop shipping industry alone is expected to reach the $200 billion mark by 2026—suggesting that it’s not only a viable business model, but if you’re a seller, there’s profit to be made.
But, while this may be the case, to discover whether drop shipping is profitable for you, it’s important to dig a little deeper.
Here we’re going to look at the pros and cons of drop shipping while considering whether it really is a profitable venture.
Let’s begin.
Drop shipping: the pros
In addition to the obvious benefit of not actually having to deal with, store or buy stock, there are additional benefits to drop shipping.
1. Reduced startup costs
When you’re considering whether drop shipping is profitable, you need to look at return on investment (ROI).
One of the biggest plus points for drop shipping is the fact that your startup costs are less than if you’re an eCommerce business sourcing your own stock or making your products in-house.
By eliminating your budget for warehouse fees and purchasing materials or inventory, you can get your business up and running for less. And, if you do have a decent starting budget, you can focus on what really counts: your marketing campaigns, communications, and initiatives.
Most drop shipping platforms take a cut of your profits for their services or charge (reasonable) monthly fees—which cost considerably less than keeping warehouses or buying large batches of stock.
2. Swift & scalable
Setting up a drop shipping business is a fairly swift process. Once you’ve set up your online store or website and selected your preferred drop shipping supplier, you can start selling.
You will of course have to take time developing your brand, setting up your social media pages, getting to know your audience, and creating value-driven content to grow your empire—but, by being able to get set up fast—with the right strategy, you will start to see results sooner rather than later.
Once you do start gaining drop shipping momentum, scaling your business will be easier than traditional eCommerce models. Free from the shackles of stock, you can focus on driving more people to your store and inspiring repeat custom without the worry of finding space for extra inventory or running into potentially brand damaging fulfillment issues. Profit and peace of mind combined.
Once you’re armed with an eCommerce business where dealing with shipping and fulfilment is not your primary concern, you can spend more time learning how to engage with your audience, improve your processes, and develop your brand.
Not only will doing so push you ahead of the pack, but you will develop a raft of new marketing skills and experience that could open lucrative new professional doors for you further down the line.
As a successful drop shipper, you will get to grips with:
- Copywriting & content marketing
- Paid & performance marketing
- Email marketing
- Mobile marketing
- Search engine optimization (SEO) & search engine marketing (SEM)
- Data analytics & A/B testing
- Video production & image editing
Digital marketing is a rewarding and well compensated sector, so if you decide to hang up your drop shipping boots, this mix of skills will put you into a good position for a career change.
Drop shipping: the cons
Now we move onto the cons: the potential pitfalls of embracing or investing in the drop shipping model.
1. Slightly less control
While drop shipping does eliminate stock handling and fulfillment from the equation, when you work with most suppliers, they have control over aspects that include shipping costs and times, package design, or personalizations.
This lack of control does affect your ability to add brand personality when your customers receive your items—and some consumers might not always find your shipping terms favorable.
A lack of flexibility in these areas could deter some customers from converting or have a negative impact on loyalty (which could drive people to your competitors). But, while this is the case, by focusing on the right areas of your digital marketing strategy, you can counteract this lack of control.
2. It’s not a ‘get rich quick’ scheme
One of the inherent cons of drop shipping is the mindset people adopt when setting up their business.
Many people have been sold the drop shipping dream: “set up your store, work a little, and make tons of profit.” Led to believe this is true, many people start their drop shipping businesses expecting immediate results—and fail miserably.
While a drop shipping business does offer the allure of lower startup costs and easier access to entry, it’s always important to remember that you pay for the privilege of someone else dealing with your fulfilment efforts over time.
Drop shipping providers may mark up their products while taking a pre-arranged cut of your profits, which means to enjoy a healthy income, you have to put in the effort.
Rather than treating drop shipping like a ‘get rich quick’ scheme or an easy source of revenue, you must remember that it’s an eCommerce business—and you must treat it like one. If you don’t, all you will do is throw your time and money into the abyss.
