Drop-shipping is a profitable business model that allows entrepreneurs to sell products without maintaining an inventory. This means that drop-shipping businesses don’t need to take on the risk and cost of storing and securing physical products.
However, in recent years, it has become more difficult for new drop-shippers to profit from this particular method of eCommerce. Below, we’ll briefly explore whether you should start a drop-shipping business in 2021.
Is the Practice of Drop-Shipping Still Profitable?
Yes. Drop-shipping is still very much alive. Your business can still make a big profit from leveraging drop-shipping. The truth is, almost any business model has both good and bad times. Drop-shipping is no different.
Contrary to what people think, drop-shipping is not a get-quick-rich scheme. It’s an effort that requires a lot of work. The results you get are directly dependent upon the amount of time you put into your business. If you think drop-shipping is easy, you’ll be disappointed when things don’t go as smoothly as expected.
Risks Associated with Drop-Shipping
With any business model, there are always associated risks. Of course, different types of risks need to be considered when adopting any business model. However, there are several risks that you will face when drop-shipping. The three major risks associated with drop-shipping are:
1. Low-Profit Margins
Drop-shipping is a business model that’s built around the idea of having low-profit margins. This means that if your costs are too high, you won’t have anything left over after paying for your products. Low-profit margins are a good thing when starting out because they mean that it’s easy to make money.
However, low-profit margins can be problematic if you want to build a long-term business. This is because your profits will never be more than what the products cost you. If the markets change and products become more expensive, you won’t have the money to adjust your business model to compete.
2. High Level of Competition
Starting a drop-shipping business requires very little capital. It’s a lot easier to enter the market than starting another type of business. The problem with this is that many people have entered the drop-shipping market and all these would-be drop-shippers also want your customers.
If you can’t build up your brand quickly, then your competition may be more successful at getting their products into the hands of your customers.
3. Lack of Control of the Supply Chain
When you’re drop-shipping, you don’t have control over the supply chain. If anything goes wrong with your shipment or supplier, there’s almost nothing you can do to make things right. For example, if your supplier goes out of business and you don’t have a backup supplier, then you’re going to lose money fast.
You also can’t control your inventory or the time it takes for an order to be processed and delivered. This lack of control will make it hard for you to make changes to your business model if required.
How to Manage Risks and Set Up a Profitable Drop-Shipping Business
Now that we’ve identified some of the risks associated with drop-shipping, let’s talk about avoiding those risks and setting up a profitable drop-shipping business. Listed below are some recommendations you should find helpful.
1. Focus on selling unique products.
If there’s one thing that’s common among successful drop-shippers, it’s that they sell unique products. This means that you shouldn’t be selling popular products from big-name brands. Instead, you should look for niche products that your competitors aren’t selling.
Unique products will make it easier for you to get ahead of the competition. Your customers will appreciate that they can’t go anywhere else to buy your products. You also won’t have to deal with a lot of competition that comes with many other people hoping to sell the same product as you.
2. Understand how your customers buy products.
If you understand how your customers buy products, then it will be much easier for you to create an effective, profitable drop-shipping business model. Make sure that you understand the purchasing needs of your customer before deciding on a business model. This will help you avoid some of the risks that are mentioned above.
3. Choose a reliable company.
Building a successful drop-shipping brand is never easy. You need to choose a trustworthy company with years of experience. EPROLO, for example, has gained trust from over 300,000 customers. They’ve helped many drop-shippers create and sustain their brands.
4. Find more lucrative markets.
Certain markets are more lucrative than others. If you’re selling niche products, then you should look for a market that provides high demand and limited supply. This will make it easier for you to sell your products at a good price without having to compete too much with other drop-shippers.
5. Don’t become oversaturated.
One final piece of advice is to not get too competitive in your market or oversaturate your market. If you do, you might end up chasing customers away. Additionally, it may be more difficult for you to get ahead of the competition.
If your drop-shipping business model requires a lot of investment in advertising, then make sure that you can handle any drop in sales that comes with oversaturation.
How EPROLO‘s Drop-Shipping Platform Can Help You Succeed
It can be tough to start a business from scratch. It can be even tougher to set up a drop-shipping business. However, with the help of a good drop-shipping platform, you may find that setting up your new eCommerce store is easier than you thought.
EPROLO can help you get ahead of the competition and set up a profitable drop-shipping business in 2021. Their platform comes with a built-in marketplace where merchants buy and sell products as well as an automated order fulfillment service that streamlines the shipping process.
EPROLO’s drop-shipping business model means that you won’t have to deal with product sourcing, order fulfillment, quality control, or packing and shipping. This will take a lot of pressure off your plate and allow you to focus on running your store and increasing sales. EPROLO is forever free for all merchants regardless of whether you are drop-shipping or selling your own products. Check out the EPROLO Branding Project for yourself to see if it provides the perfect solution for your drop-shipping needs.