Drop shipping is only profitable if you have a unique product or brand name that makes you different from all of the competition.
- If you are trying to sell by drop shipping the exact same item from the same supplier that many other sellers are buying from you will have trouble being competitively priced. You will be faced with razor thin profit margins. Remember, drop ship suppliers do charge you for their service and they really don’t care which one of their customers makes the final sale. They make the same profit no matter who sends them the order.
- Also, you need to develop some unique and creative ways to convince the customer to buy from you instead of all of the other sellers offering the same product. If you try and compete on price alone, you have already lost the sales game. Someone else will always be willing to cut their price to compete, and if you are drop shipping and someone else is importing direct and fulfilling orders from their own warehouse, I guarantee, they are paying a lower price than you.
So here are the facts about drop shipping, good and bad:
Pros– Drop shipping makes it easy for you to enter the market. No big investment in inventory, no need for a warehouse of storage space, no need to pack and ship customer orders.
Cons– The same easy entry into the market means that it is easy for ANYONE to start a drop ship business. That means lots of competition on items.
Pros– You don’t have to pack and ship orders.
Cons- You have no control over how fast a drop ship supplier will process and ship your order for you. If a bigger customer comes along with more orders he may go to the head of the line, then maybe your orders gets pushed back and are not shipped for a day or 2.
Cons– Customer service by the drop ship supplier is not controlled. Maybe Gladys in the drop shippers customer service office takes a few sick days. Her job is to send you tracking numbers when the order is shipped. You have advertised to your customers next day shipping. All of a sudden you start to get a lot of customer calls and emails asking for tracking numbers. Your workload just when thru the roof. OOPS.
Cons– Returns. If a customer wants to return a defective product or just doesn’t like what he received how do you handle the return process. Do you accept the return back to your address? Or, do you have it returned back to the supplier and hope the supplier handles it properly. Remember, if you are selling on Amazon or eBay your account can be suspended because of poor service or lots of customer complaints. That would be a big price for you to pay for the convenience of drop shipping since it is extremely difficult to get your account reinstated.
Cons– Passive income. Many people advertise drop shipping as an easy way to make passive income. Let me assure you, drop shipping is not a passive business, no matter how much automation you can introduce in your order handling process. There are still many, many tasks that must be checked and verified. You must make sure your supplier does not run out of inventory. You must make sure your supplier hasn’t raised his price. You must make sure your supplier has actually shipped your orders on time and correctly, and then notify your customer of the ship date and tracking number. You must offer customer service to answer any questions or handle any problems.
As you can see from the list, there are a lot more cons than there are pros, and this is just a simple list. So why don’t more people drop ship? because it is not as easy as many people advertise it to be.