Are you one of those people who strongly feel that the pre-internet days were more peaceful? Where people would finish their studies and land a conventional job that they would probably be stuck with until it was time to retire? It was the strong-hearted ones with a decent financial capacity who opted to get into business back in those days. Well, that isn’t quite true today, is it? With the dawn of the internet era came a multitude of job opportunities that previously didn’t exist, giving ordinary people new options to explore. One such major business opportunity that has recently become popular is drop shipping. What’s special about it? Well, your operational costs would be next to nothing. Plus, there’s a marked difference in your costs for setting up shop.
Drop shipping is essentially a business model in which you don’t have to store the products that you sell. You buy the products you want to sell from a third party who would take care of the branding, packaging as well as shipping. Think about it as a cloud warehouse from where you could get your product packaged and shipped without ever having to see it yourself! All you have to do is focus on marketing and customer acquisition. The nuisance that retail fulfillment can be would be completely off your head!
Here are five reasons why drop shipping is an excellent business idea for anybody seeking to start a business on a small budget.
1. Ease of getting started: You don’t need a fat bank account to start a drop shipping business. With a regular business, almost all of your initial investment would go into creating an inventory and stocking up on the products that you plan on selling. But with drop shipping, maintaining an inventory is not your headache anymore. Your overhead costs would also be negligible as you wouldn’t have to spend money on renting a warehouse or hiring people to manage it.
2. Work from anywhere: As long as you have a good internet connection, you can run your business from anywhere. While you are in, fact, the owner of your business, the actual part that you play is similar to that of an intermediary – the link between your customer and your supplier – making it possible for you to not plant roots anywhere.
3. The sky is the limit when it comes to products: As long as your supplier sells it, you can add any product to your catalog. Instead of beginning with a wide variety of products, we would suggest you start small and later on, you can slowly start expanding your range of products by simply updating your catalog.
4. No shipping complications: The biggest challenge of running an e-commerce business is retail fulfillment, the process of packaging and shipping your products. Since all major e-commerce giants offer free shipping, returns and exchanges, that has become the bar that even small entrepreneurs have to strive towards. The best part about drop shipping is that you do not have to worry about any of these complications.
5. Serves as market research for the future: Let’s say that you have identified a niche product and found a third-party supplier for the same. Before you open a full-fledged online or physical store, you need to test the market to ensure that there is a steady demand for your product. In such scenarios, starting off with a drop shipping business for the same product would serve as the perfect market research, after which you can plunge into it headfirst if the results are in your favor.
While drop shipping does have a lot of pros, its main drawback is the low margins. It’s not possible to make a lot of money out of it unless you hustle all day to make sales since competitors will also be trying to sell the same product at the cheapest rates. So, unless your product is unique, you will be competing against others by trying to sell your product at a very low rate, thereby lowering your profit margins. But if your objective is making some money on the side without going through all the stress that a retail merchant goes through, then drop shipping may be right for you.