5 Benefits Of Dropshipping And Why You Should Offer It

Many current and aspiring entrepreneurs get into drop shipping for its low barriers to entry and the potential to succeed on the heels of a brand or concept alone. Because of this fact, trying to grow a drop shipping business often boils down to one giant marketing experiment. And anyone who’s tried their hand in marketing knows it’s not always as simple as it seems. 

All online business models have drawbacks—and drop shipping is certainly no exception. However, in contrast to retail, wholesale, subscription and services e-commerce business models, drop shipping carries some straightforward advantages.

Let’s discuss five undeniable benefits of drop shipping below. 

Low Upfront Cost

Many online business owners are initially lured into drop shipping because it almost sounds too good to be true: you can make a profit without needing to front for the products. That’s right, if you can sell your brand, you can make money. However, that doesn’t mean drop shipping is completely free of costs. You’ll need an online storefront. Many drop shipping businesses elect to go for hosted e-commerce platforms for a monthly or annual fee. 

Additionally, selling on marketplaces will eat into profit margins. You can get around these fees by coding your own store, but in many cases doing so proves too expensive and time-consuming for a drop shipping business that’s just beginning. Plenty of other potential drop shipping expenses exist, such as marketing costs and supplier expenses, but most shouldn’t  eat into your operating expenses too much, or by surprise. 

Less Time Spent on Logistics 

In the golden age of online experiences, customer preferences are at an all-time high. And thanks to mega-marketplaces and evolved logistics infrastructure, timely shipping is the norm. It’s so prevalent that even an independent brand isn’t cut slack when they’re late on a shipment. 

Worse, returns are a fact of life across e-commerce companies. Handling your own fulfillment means creating a process for receiving, re-stocking and repurposing the substantial percentage of orders that will inevitably be returned. Drop shipping won’t result in fewer returns. Not controlling your logistics also leaves you vulnerable to issues. But as long as you choose the right drop shipping partners, you’ll save yourself a lot of time dealing with stocking, fulfillment, returns and more. 

Easier to Scale 

The more a business controls its supply chain, the better their potential profit margins. However, getting to that point is no easy task. For many online companies that could never do enough revenue to warrant bringing production, storage and/or fulfillment in-house, drop shipping offers a hands-off way to grow. In another case, a business might want to take advantage of a peak business season and use drop shipping as support in the event they can’t handle their sales volume. In all cases, a drop shipping business will require fewer employees to operate. Minimal employees and little overhead make it much easier to navigate the online business waters. 

Business Flexibility

Buying wholesale products and having a supplier take care of fulfillment not only allows an e-commerce business to scale quickly, but it also provides overall business flexibility. Without the need for as many employees, and no reason to maintain a physical business address, drop shipping allows an entrepreneur to base their business from anywhere they can get an internet connection. For some business owners, the work-from-anywhere aspect — in addition to these other drop shipping benefits — far outweigh cons like low margins. Being able to base your business from anywhere can also carry financial advantages. For example, registering your business LLC in tax-friendly states like Wyoming, Florida, Delaware, Nevada and Arizona, among others, allows dropshippers to improve on their low margins with greater tax savings. 

Product Validation

Drop shipping can even be valuable for established businesses that control their fulfillment. E-commerce stores, like any type of retail store, need to continually alter and expand their product offering to appeal to consumers. This is usually done by expanding product selection in the same vertical they currently offer. A brand that uses Shopify to sell electronics online but currently only specializes in audio gear might want to start offering computer equipment and memory products.

But instead of buying a large run of product and hoping for the best, drop shipping lends to experimentation. Build a new product section on your site and list your risk-averse, drop-shipped products. An initial three-month run should tell you whether buying and stocking the product for a potentially better margin is in your best interest.

While running a full-fledged e-commerce business is a constant juggling act of seemingly equal and crucial responsibilities, drop shipping allows store owners to sit back and relax a little. That of course doesn’t mean succeeding in a drop shipping business is as simple as starting one. Supplier fees, less control, extra communication, and a crowded drop-shipping marketplace make launching a drop shipping business a challenging, but potentially, fruitful endeavor.