Much is said about the business model trends that are emerging, that is why you will surely ask yourself, is the Dropshipping system really profitable? On Hispanic Entrepreneurs we give you the answer to this question.
Dropshipping is an online system with which you sell products with a minimum investment and without having products in stock. In other words, you offer the items from a wholesaler called dropshipper, which is the one that stores and ships them directly to the customer. In short, it is an intermediary between the wholesaler and the customer. It is the best way to set up an online store with little investment. It is an ideal business for start from home.
One of its greatest advantages is that you do not invest in stock, you have the freedom to test. If an item does not sell, you do not lose anything, just go to try another. By having to pay per sale you can offer the amount of products you want. It is scalable because everything can be automated, and you will not have to invest time or money in storing or shipping what you sell.
The management of the platform is easy to use, you have the possibility of working in the place of your choice. It is recommended as a preliminary step to e-commerce.
Is the Dropshipping system really profitable?
Those who opt for the Dropshipping system will have to be clear that they will not receive large sums of money overnight. By not having to buy and store merchandise, the expenses are lower, but so will the profits.
This is because most of the margins from the sale will go to the supplier that manufactured the product. It will only be compensated if you achieve a large sales volume, the margins are between 5 and 25%, an average of 10% without adding the fixed expenses of the store.
It should also be considered that if the dropshipper is from another country, the profit margin may be affected by fluctuations in the currency market or shipping costs.
On the other hand, if you want to make a discount to increase sales, this will pay off your profit margin. Other expenses that you must assume are those of the assembly of the store, advertising, marketing strategies, customer service, among others. Take into account that you have to stand out from the rest because it is a business idea very competitive. The actions and investments that you execute to do so will come out of your pocket.
Another point that can make you lose money is that you do not have control of the supply chain. You depend entirely on the wholesaler and if this fails, the responsibility will be with the store. That is why it is necessary to have a responsible supplier, who meets the delivery deadlines.
The same happens with returns, the visible face will be your business, so you have to guarantee a good return policy. If they return a product you will have to pay for it.
In some cases you will compete with the wholesaler itself if the products are branded. It may happen that the price you offer to the end customer is lower than the one you set for your dropshipping business.
Whereas, if the provider provides you with the online store, you will have to pay for its use monthly, which will further reduce profits. Add to this the legal expenses of having an online store depending on the country you are in and the electricity and internet costs.
Keys to make the Dropshipping system profitable
Despite all the difficulties that may exist, andl Dropshipping can be successful if you choose the products to sell well. In addition to understanding how the sales funnel works and having a strategy.
Apart from this, be sure to study in depth the operation of marketing and tools like Facebook Ads to attract traffic and conversion. Pay special attention to the copies (texts), because these have to capture the customer's attention and take them to buy.
Iidentifies profitable products to sell online through market research and from an area that you like. Because otherwise you will feel unmotivated and end up getting bored and abandoning the project.
Try to differentiate yourself by the way you sell and the service you give. Be inclined to deliver something else to the client such as tips and explanatory videos on the use of the articles. Do not sell branded products because you have to lose with the manufacturer. It also has a 100% reliable supplier and provides the best customer service.
If you choose the right product and strategy over time you will start to make a profit. The key is to be constant, to make an effort and to like what you are developing. Ideally, try and adjust until you find what works for you.