Is dropshipping a real business, or is it a get-rich-quick scheme? Curious about whether dropshipping is the real deal or a mirage of quick riches?
Dropshipping, the innovative retail fulfillment method that’s taking the eCommerce world by storm, offers the promise of financial freedom and entrepreneurial success.
In this blog article, I’ll delve deep into the world of dropshipping, unveiling its inner workings, potential benefits, and the misconceptions that have left many wondering if it’s too good to be true.
Discover the crucial steps that make up the dropshipping process, and explore the reasons why so many entrepreneurs are turning to this business model. Let’s dive in!
What Is Dropshipping?
Dropshipping is a retail fulfillment method that allows business owners to sell products to customers without holding any inventory. In traditional retail, entrepreneurs would buy stock upfront and store it until it’s sold.
In contrast, dropshipping eliminates the need for inventory and the associated costs, as products are shipped directly from suppliers to the customers.
💡 Tip: Check out Everything You Need To Know: Dropshipping Business Model Explained.
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How Does Dropshipping Work?
To help you grasp the inner workings of the dropshipping model, let’s break it down step by step:
➡ Step 1: Your Online Store or Marketplace
As a dropshipper, your journey begins by setting up an online store or listing products on a digital marketplace.
➡ Step 2: Partnering with a Supplier
Next, you team up with a dropshipping supplier or wholesaler who specializes in dropshipping services.
➡ Step 3: Product Selection
You peruse the supplier’s inventory and pick the products you wish to sell, then showcase them in your store or on the marketplace.
➡ Step 4: Customer Orders
When a customer places an order on your website and pays for it, you, the dropshipper, forward the order details to your supplier.
➡ Step 5: Supplier’s Role
The dropshipping supplier takes charge, of processing the order, packaging the products, and sending them directly to the customer’s address. You don’t handle the inventory or shipping.
➡ Step 6: Pricing and Profits
You pay the supplier the wholesale product cost and keep the profit, which is the difference between the wholesale and retail prices.
➡ Step 7: Direct Delivery
The customer receives the products directly from the supplier, with your branding and packaging if applicable. It’s all made seamless through automation software.
Why Start a Dropshipping Business?
According to the most recent dropshipping statistics, the global dropshipping industry is expected to reach $243.42 billion in 2023. Moreover, the dropshipping business will be worth $500 billion by 2027.
An intriguing fact is that this ratio is expected to rise more in the future years, with evidence indicating a continuous and significant increase. Nonetheless, the dropshipping market is expected to develop further, reaching $301.11 billion in 2024 and $372.47 billion in 2025.
👉 Also, check out the 48 Dropshipping Statistics And Trends To Know For 2023.
👉 Check out the Best Side Hustles For Women – Make Money From Home.
Hence, it is a pretty profitable venture, right? So, here’s your number one reason why start dropshipping. Let’s get to the other ones. 👇
Benefits Of Dropshipping
The dropshipping industry is on the rise and holds significant potential. Here’s a look at what makes it a compelling business choice:
✅ Cost-Effective Startup
Starting a dropshipping venture is budget-friendly. You don’t need to invest in upfront inventory, warehousing, or physical storage spaces.
Another noteworthy benefit of dropshipping is that it spares you from the responsibility of managing shipping and order fulfillment. Furthermore, it obviates the necessity for incurring expenses related to product development and manufacturing.
Additionally, with the dropshipping model, you have the opportunity to harness a variety of digital marketing strategies, including social media, content marketing, and search engine optimization, for the promotion of your products without a substantial financial outlay.
Thus, this keeps your initial costs low, allowing you to allocate funds strategically.
💡 Tip: Read about What Is The Minimum Budget To Start Dropshipping With Shopify?
✅ Minimal Inventory Expenses
In the dropshipping model, you only purchase products once you receive customer orders and payments. This eliminates the risk of holding unsold inventory.
However, keep in mind that there are other costs related to your business operations, such as supplier fees and technology tools, shipping expenses, and more.
Therefore, most dropshippers may find it necessary to invest in various technological tools and software solutions to effectively oversee their inventory, monitor sales, streamline order processing, and manage various facets of their business.
For example, lately, I have been using the Avasam automation tool which offers a comprehensive suite of tools to empower dropshippers to seamlessly integrate their online stores, and procure products from reputable UK-based vendors. 👇
Also, it streamlines tasks such as product listing, order processing, shipping, and inventory management.
✅ Efficient Order Fulfillment
With dropshipping, you benefit from efficient order fulfillment. Since you don’t stock inventory, there’s no need to handle picking, packing, and shipping orders.
Thus, dropshipping suppliers take care of these aspects, saving you time and money.
For example, I am using ShipBob for my order fulfillment, and if I compare it to before, it really helps me lower order fulfillment costs. 👇
✅ Diverse Product Range
Dropshipping offers a wide range of products without the hassle of procurement and inventory management.
You can cater to various customer preferences by providing different sizes, colors, or variations of products. Product research tools can assist in finding winning products.
For example, I am personally using the Minea product research tool. It helps me find the products in my niche, and check on their market prices, supplier price, engagement, customer analysis, competitors, and more. 👇
The absence of physical inventory management makes it easy to scale your business. Adding new products or expanding into new markets is straightforward.
Growing your business can lead to better pricing and terms negotiation with suppliers, increasing profitability.
👉 Check out the Dropshipping Profit Margin: A Step-By-Step Guide For Beginners.
✅ Flexible Work Schedule
The dropshipping model provides flexibility and freedom. You can work from anywhere and have a flexible schedule since you’re not tied down by physical inventory management.
👉 Learn about How Does Instacart Make Money – Ultimate Review.
This allows you to focus on growing your business and enjoying a more adaptable lifestyle.
Why People Think Dropshipping Is Get-Rich-Sheme?
Dropshipping is a business model that has gained popularity in recent years due to its relatively low barrier to entry and potential for profitability.
However, many individuals harbor unrealistic expectations about dropshipping, leading them to believe it’s a quick and easy way to amass wealth. Several factors contribute to this misconception:
❌ Misleading Marketing
Some online gurus and courses tout dropshipping as a “get-rich-quick” scheme to attract aspiring entrepreneurs.
Hence, they often showcase their own success stories or highlight exceptional cases, creating a false perception that instant wealth is easily achievable.
In fact, you should not set a goal by saying, “I want to make $5 million annually.” Try to be as realistic as you can and ensure your goals are clear and well-defined.
That’s the reality! In addition, many legit dropshippers try to tell you that it is a not get-rich scheme at all, and they try to make up your mind. 👇
❌ Minimal Upfront Costs
One of the appealing aspects of dropshipping is that it requires minimal initial investment compared to traditional retail businesses.
Since there’s no need to purchase inventory in advance, many people assume that this translates into making quick money without significant financial commitment.
But, that is simply not the case. You have plenty of other costs, which of course you can manage. So, get to pay for a website builder, domain, dropshipping tools, marketing, and more.
💡 ADVICE: Do not go in this blindly. Do some planning before starting out and create a short dropshipping business plan.
❌ E-commerce Hype
The e-commerce industry, driven by giants like Amazon and Alibaba, has made it seem like rapid success is normal. And, of course, the rise of online shopping and the digital economy’s rapid growth has led some to believe that dropshipping can replicate such achievements with little effort.
But no, even the richest dropshippers talk about how you need time and effort to succeed.
For example, The story of Andreas and Alexander is truly remarkable. In the realm of pet-related businesses, these two entrepreneurs achieved a remarkable milestone by generating an astounding $10 million in sales.
They did a series of essential strategies and tricks in order to succeed. For instance, they made a deliberate choice to focus on a distinct pet niche, enabling them to zero in on a dedicated community of devoted pet enthusiasts. And, all of this did not come overnight.
Also, by gaining a deep understanding of their target audience’s desires and preferences, they adeptly curated a range of top-notch products tailored to their specific interests.
❌ Social Media Hype
Social media platforms are rife with stories of people who claim to have turned their lives around through dropshipping, showcasing luxurious lifestyles, fancy cars, and exotic vacations.
Thus, these luxurious displays of wealth can give the impression that dropshipping can lead to instant riches. However, not all glitters are gold, and not all stories are true, or at least told as they were.
For instance, read about how Chris Wane, a seasoned expert with Facebook ads, talks about his own dropshipping mistakes. 👇
Not long after I’d started making a decent amount of profit, but before I really truly understood Facebook ads completely, I decided to launch a brand new product first thing on a Saturday morning. I had 50x £50 a day ad sets, so I was spending a total of £2,500 per day in a test phase. Idiot!
My thought behind it was, “I know what I’m doing now, this product will be a winner. I just need to spend more and I will make more.” How wrong I was…
To make matters worse, I was going on an all-day bender for a friend’s birthday so my plan was just to check into it every now and then just to make sure it was going well and if it wasn’t then I would just turn off the ad sets, no biggie!
The problem was that I got so carried away with the day (there was lots of beer), that I completely forgot to check my ads. The next day, when I woke up hungover and realized that I hadn’t checked the account I felt sick.
In total I had spent over £3,100 on ads and I had only made 10 sales… a loss over £2,900.
I quickly learnt that spending more doesn’t always equate to earning more. Luckily I had other products that were profitable but it still stung, a lot!
Moral of the story: don’t launch expensive campaigns if you’re going out drinking.
As you can see, not developing a proper marketing strategy is one of the mistakes to avoid when dropshipping.
❌ Lack of Business Understanding
Unfortunately, many people who venture into dropshipping have little to no prior business experience. They may not fully grasp the complexities of running a business, which leads to unrealistic expectations about the effort and time required to make it successful.
Therefore, it’s crucial to dispel these misconceptions about dropshipping and emphasize that it’s not a guaranteed path to quick riches. Dropshipping is, at its core, a legitimate business model, and like any business, it demands hard work, dedication, and perseverance to achieve sustainable success.
👉 Read about Is Testerup Legit? Beginners Guide + Honest Review.
Is Dropshipping a Scam?
If you’re wondering whether dropshipping is a scam, consider this: In 2020, Shopify merchants alone contributed over $307 billion to the global economy.
This fact, along with numerous successful seven-figure dropshippers sharing their stories, is strong evidence that dropshipping is a legitimate business model.
For example, Harry Coleman is a $5milion dropshipper, running 4 dropshipping stores. He initially began his dropshipping journey with a dropshipping store specializing in nail products.
However, he later transitioned to a more diverse general store model, eventually expanding to two general stores. Today, he is one of the richest dropshippers out there.
Furthermore, a significant number of online sellers are dropshippers, and Shopify has created over 3.6 million jobs worldwide.
So, the next time you hear someone label dropshipping as a scam, keep in mind that these statistics are specific to Shopify, and there are many other eCommerce dropshipping platforms with similar success stories.
How Not To Get Scammed While Dropshipping?
Of course, scams could happen anywhere, whether is dropshipping, an eCommerce business, or a brick-and-mortar store. But, when it comes to dropshipping, I got you covered.
So, based on my experience, here are the most common dropshipping scams & ways to deal with them. 👇
Order Product Samples To Check on Product Quality
First thing first, you can ask your dropshipping suppliers to send you product samples before parenting with them. This way, you can check on product quality.
Also, if the supplier does not provide product samples, you can place orders under different names or addresses to see what they send. This is a cost-effective method to inspect their reliability.
Another option is hiring a third-party quality assurance (QA) agent who inspects products before shipment and addresses any defects with the supplier.
Be Careful About Fake Suppliers and Reviews
Your best option is to meet suppliers in person if possible. Attending a niche-specific trade show can help you connect with legitimate suppliers. However, keep in mind that renting a booth at such events can be expensive, which indicates the legitimacy of attending suppliers.
So, if meeting in person isn’t an option, thoroughly explore the supplier’s website. Look for contact information and a physical address. You can also request product samples to assess the quality.
Also, To verify a supplier’s legitimacy, request their company registration and business license numbers. Look for their area code in addition to their address and phone number.
I never go through this step blindly. In fact, I use the supplier directory on Dropshipping.com. They provide a comprehensive list of more than 2000 reliable suppliers for you to select from, completely free of charge.
Additionally, check the supplier’s store reviews, and if most of them are positive, it’s a good sign of trustworthiness.
When reading reviews, be cautious. Fake reviews are prevalent, so look for negative feedback and suspicious patterns of positive comments. A supplier with only a few positive reviews among many may indicate fake reviews.
Protect Yourself From Fraudulent Payments
If you’re working outside these platforms, consider using an escrow service or check customer testimonials on trustworthy websites like Trustpilot.
Also, make sure you use reliable payment gateways for dropshipping based on your needs. Some of them are:
- Amazon Pay
- Shopify Payments
- Google Pay
💡Tip: Read about Dropshipping PayPal: How To Use It & Not Get Banned.
How To Treat Dropshipping Like Real Business?
Now, let’s learn how to make your dropshipping business legit. 👇
➡ Get Familiar with Different Business Structures
Before diving into dropshipping, it’s essential to grasp the various ways you can structure your business.
Think of these options as the building blocks for your business foundation. Hence, they determine how your business functions, handles taxes, and your personal liability in case things go wrong.
For instance, an LLC protects the personal assets of its owners (referred to as “members”) from business debts and legal liabilities. In essence, if your LLC incurs debts or faces legal action, your personal assets, such as your home or savings, are generally protected.
Also, LLCs typically enjoy pass-through taxation, meaning the business itself does not pay federal income taxes. Instead, profits and losses “pass-through” to the members, who report them on their individual tax returns. This tax structure often results in lower overall taxes and simplifies tax compliance.
On the other hand, LLP offers personal liability protection to its partners. This means that if the LLP faces legal issues or debts, the partners’ personal assets are generally protected from business-related obligations.
Like in an LLC, income and losses are passed through to the partners, who report them on their individual tax returns. This tax structure simplifies tax obligations and can lead to tax advantages for partners.
💡 Tip: Learn about LLC vs LLP: What’s The Big Difference?
The choice of structure depends on your long-term business vision, whether you aim to keep it small or scale it up.
Each has its pros and cons, so take your time and perhaps seek professional advice to make the right choice.
➡ Secure an EIN Number
If you’re new to business, you might not be familiar with an EIN (Employer Identification Number). Think of it as a social security number but for your business.
This unique nine-digit number is assigned by the IRS and is important for tax reporting, banking, and an added layer of identity protection.
Applying for an EIN is a free and straightforward process that can be completed online through the IRS website. Hence, you need to send this SS-4 Form application to apply electronically, or via fax or mail.
➡ Obtain Your Business License
Getting a business license is a critical step, much like getting a permit. Thus, it gives you the green light to operate within a specific jurisdiction, city, county, or state.
Avoid penalties and show your commitment to customers, suppliers, and potential partners by ensuring you have the right license for your area.
➡ Open a Business Checking Account
Setting up a business checking account might seem basic, but it’s a crucial move. It simplifies tracking your finances, making tax filing easier, and it also adds a professional touch to your business interactions. Be sure to research banks, gather necessary documents, understand any associated fees, and explore additional features they may offer.
👉 Also, learn about Dropshipping Accounting: Tips For Managing Your Finances.
➡ Deal with Your Taxes
Taxes may not be the most exciting topic, but they’re vital for any legitimate business. Therefore, stay on top of your tax responsibilities for a clear financial picture of your business.
Keep detailed records of income and expenses, take advantage of deductibles, set aside money for taxes, and meet all the necessary deadlines. Also, if it gets overwhelming, consider professional help for guidance.
👉 Learn everything you need to know about Dropshipping Taxes and Payments – Must-Know Facts.
How To Scale As An eCommerce Store Owner?
🔸 Conduct Market Research
To begin your journey, it’s essential to identify a niche or product category that exhibits high demand and low competition.
One approach is to utilize Google Trends to assess product demand. For example, I will check Google Trends results for travel pillows. As I’ve been thinking about adding these products to my dropshipping store, I am really interested in the results. 👇
Alternatively, you can leverage specialized product research tools such as Sell The Trend or Minea to gain insights into specific products or niches.
🔸 Create Your Dropshipping Store
Among these options, Shopify stands out as a prime choice for dropshipping entrepreneurs. It boasts an intuitive user interface and a plethora of visually appealing themes, both free and paid, to suit your store’s aesthetics.
Furthermore, Shopify offers an array of customizable features and a user-friendly drag-and-drop editor, simplifying the store creation and modification process.
🔸 Choose Your Dropshipping Suppliers
Another critical aspect of dropshipping success is securing reliable suppliers. And, as I already mentioned above, you can search for suppliers on your own, using Google.
However, I highly recommend you think twice before diving into partnering with any supplier without doing research.
As I already mentioned, for me, the supplier directory on Dropshipping.com is a gold mine. It provides a curated list of over 2,000 trustworthy suppliers.
This directory enables me to narrow down my search based on my specific dropshipping niche, supplier location, shipping costs, and various other criteria.
Additionally, it offers invaluable information on pricing, order processing times, minimum order quantities (MOQ), warehouse locations, product range, and other essential details.
👉 Check out the 22 Best Dropshipping Suppliers In The USA [General + Niche].
🔸 List Products To Your Dropshipping Store
Once you’ve identified your dropshipping suppliers, the next step is to integrate them into your store.
In fact, this enables you to start adding products, craft compelling product descriptions, and optimize for search engine visibility.
However, I recommend you use automation apps and automate your process of importing and listing products.
For example, I have experience of using some of these apps. Thus, Megamo provides a convenient feature that automates the process of importing products into your store.
Their integrator allows you to effortlessly connect dropshipping wholesalers to your store. Moreover, their website offers a vast database of more than 300 wholesalers to choose from.
🔸 Develop a Marketing Strategy
Effective marketing is an absolute requirement for generating sales in the world of dropshipping.
To succeed, it’s crucial to plan a comprehensive marketing approach. This should encompass essential strategies such as search engine optimization (SEO), social media marketing, email marketing, and content marketing.
For example, For SEO enhancement, I use marketing tools, like Plug-in SEO tool. 👇
On the other hand, I also leverage the targeting features offered by social media platforms to reach your specific audience based on demographics, interests, and behavior.
Furthermore, to maximize your marketing impact, explore tactics like cross-selling, up-selling, promotional code offerings, and the establishment of referral programs.
Also, incorporating video marketing into your strategy is highly recommended. Videos provide an engaging way to showcase your dropshipping products, highlighting their features, benefits, and usage.
For instance, platforms like TikTok excel in short, captivating videos, making them ideal for delivering marketing messages.
While platforms like YouTube might be more budget-friendly for dropshippers, they allow you to effectively present your products, offer valuable insights, and cultivate a loyal customer base.
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In conclusion, let’s break down this dilemma! Dropshipping business is definitely a real business, and it is NOT a get-rich scheme.
In fact, lots of people have this dilemma because of the misleading marketing, minimal upfront costs, e-commerce hype, and fake social media success stories that run over the internet.
The reality is that dropshipping, like any other business, requires hard work, dedication, and a solid business strategy to achieve sustainable success.
And, by following my dropshipping tactics, you can develop your dropshipping business idea, and start.
This way, the dropshipping business model offers numerous benefits, including cost-effective startup, minimal inventory expenses, efficient order fulfillment, a diverse product range, and scalability. These advantages have fueled the rapid growth of the global dropshipping industry.