Eric Liang

Should You Start a Dropshipping Business?

Eric Liang -

If you are reading this post, I'm confident that it's safe to assume that you have some sort of entrepreneurial spirit in you or you just recently came from YouTube after watching some supposedly self-claimed "guru" who generated X amount in the past few days, and are now wondering if you should start a dropshipping business.

So, should you start a dropshipping business?

This is one question I asked myself back in 2017 after learning about the concept of dropshipping by accident after working at a small business eCommerce company for a while. I eventually played around with the idea, and dove in myself to see what it was like.

What Is Dropshipping?

Dropshipping is a business model where you sell products online without holding the actual product in your inventory. Instead, you list the products you want to sell on your online store website at a higher price, and whenever an order is placed, you then make an order on the actual website where the product is being sold from and have it be sent to your customer's address while you put your own information as the billing address. Whatever the difference in cost was, that is your profit.

Is Dropshipping Easy?

No. Whatever the business model may be, whether it be not having to hold inventory, whether it is subscription-based or not, dropshipping is just another ecommerce business. What this means is you will face all the challenges that every ecommerce business owners face, which includes business, marketing, sales, and technical challenges.

If you are doing this solo, you better have some pretty darn good internet marketing skills and a big budget to back up your marketing activities otherwise you're in it for a disappointing ride or a long ride of trials and errors.

Here is a common list of challenges you will face in the world of eCommerce when you are just starting out with a extremely low budget and no existing fanbase or following of any kind:

  • Finding the right product and niche to sell to
  • Getting the right traffic to your website
  • Showing up in a good position on search engine results (SEO - search engine optimization)
  • Having a unique, professional, and trustworthy looking website
  • Having a good product page (good product pictures, good product description, etc)
  • Converting your traffic into sales
  • Long shipping time from manufacturer to consumer (~2 weeks to ~1 month)

Not only that, you are also going to be competing with non-dropshipping sites such as Amazon. I'm sure you do this as well. Whenever you want to buy something online or offline, you'll probably pay a quick visit to amazon.com to see if they have the same item at a higher quality but at a lower price with better shipping times.

Startup Costs

It doesn't cost much money to get the basic tools needed to start (other than buying a domain name and web hosting services), but that means a lot of people will be doing this. However, if you have no technical skills at all, meaning you don't know how to create a logo, you don't know how to create a custom themed website, and you don't know how to edit pictures or take proper product photos, the startup cost will easily go up fast.

Here's a rough estimate of some of the costs:

  • Domain Name: ~$10/yr
  • Web Hosting: ~$60/yr (unless you use sites like Shopify, then the costs goes up)
  • Website Theme: ~$30+
  • SSL: ~$40/yr (unless you use sites like Shopify)
  • Ads: ~$1,825/yr+ (unless you have an existing following or fanbase to market/sell to)

How Important Is It To Have A Big Budget For Advertising

If you are not willing to play this long term, you'll have to either have very good marketing skills/strategy, an existing large fanbase, or a big budget to advertise your ecommerce store products.

Remember, it's easy to acquire the tools to get started setting up a dropshipping store; however, because of this, there are a lot of other people like you who are in the game. What that means is, a lot of people will be spending $5 on ads on platforms like Facebook. So in the end of the day, having a big budget does matter. This is what these "gurus" on YouTube never tell you. It's all in the marketing, but it's also in the money too.

Conclusion

So, after you've read all of this, should you start a dropshipping business? It depends. If you have the money to test a variety of products, and are willing to play this long term, go for it. You'll learn a lot of stuff from the experience. However, this doesn't mean you'll be guaranteed to succeed. If you are the opposite, and you just want to make a quick buck with a small ad budget that's not at least $1,000 a year, I would suggest that you avoid dropshipping altogether.