Pros and cons of a dropshipping business model

Interactions of sellers, buyers, and product vendors have many advantages if being based on a dropshipping business model. Shortcomings of the model are available as well since nothing is a silver bullet in retail. Let’s begin with the pros while keeping in mind that the pros appear with fully functional dropshipping software only:

• Large product range. One of the most distinctive features of dropshipping is that an e-store needs no warehouse to keep all physical items available in the catalog. The product range is theoretically unlimited, therefore;
• Reduced difficulty curve. This is about a seed capital that seems to be almost redundant to buy stock items. Such an easy start is especially critical for niches with either large assortments or expensive products;
• Saving time. The most time-consuming procedures such as storage, packing, and shipping of goods are performed by the suppliers, not dropshippers. Besides the saved time, fewer human-factor errors happen when newcomers enter the business;
• Flexibility and independence. The opportunity to deal with multiple suppliers gives free hand to dropshippers who can benefit from the competition between rivals in certain product segments;
• Empty inventory balances. Dropshippers have no unsold stock items since they do not hold physical warehouses. This is especially beneficial with regard to trendy goods whose trading cycle is limited;
• Optimized expenses. Neither the cost of storage & delivery nor custom duties constitute recurrent expenditures of dropshippers. Instead, they can spend more money on marketing and promotion that lead to sales growth.

The easy-to-start dropshipping business model is not entirely without flows. Newcomers should pay their attention to the following:

• Severe competition. This is a direct consequence of the inherently low entry barrier. Thousands of other novice entrepreneurs are trying to occupy the same niche. Both enhanced efforts and increased advertising budgets can be required to win the battle;
• Specific routines. Search engine optimization, outstanding design, and never-ending usability improvements constitute just a fraction of the day-to-day activities into which dropshipping merchants have to invest their time and money to stay competitive;
• Profit peculiarities. The basic income source is the commission fee taken from the difference between the price offered by suppliers and the sales price paid by end customers. Maintaining the right balance is crucial for dropshipping ecommerce websites to remain below the affordability line;
• Reputational risk. The responsibilities of suppliers are always beyond the control of dropshippers. That’s why multiple suppliers of similar goods are worth having to deal with;
• Questionable USP. Dropshippers face troubles with making unique selling propositions: it is unclear why customers should choose just your dropshipping store among numerous competitors. Primitive dumping is always a losing strategy. Faster order processing along with advanced functionality of an e-store can form a good USP;
• Scaling up. Well-arranged workflows result in sales growth. Dozens if not hundreds of orders per day can appear a norm at any moment. Dropshipping stores must be ready to scale up their trading volumes from day one. 

Utilizing dropshipping advantages while minimizing the model’s flows is what the wisely selected dropshipping software is aimed at. What types of dropshipping stores can be created?

Is Dropshipping Business Still Profitable in 2022?

Public profiles vs mono-product pages vs fully-functional dropshipping e-stores

The fastest and easiest way to start a dropshipping activity is to register a dedicated public profile/channel on social media. Nothing but an intention is enough to spend a couple of hours to create such a dropshipping solution. At the same time, some critical restrictions make this type of dropshipping store poorly functional:

• A lack of embedded payment gateways can keep customers from buying;
• One of the lowest entry thresholds forms furious competition;
• A business is fully dependent on a social network: an occasional ban on your channel can make you lose your customer audience;
• No effective tools for analyzing customer behavior are available: promotion campaigns have to be created by intuition;
• The online presence is conditional: SEO is meaningless without a website;
• Treatment by product vendors can be a little discriminatory: handling your orders among the latest is fairly expected.

Creating a mono-product webpage takes not much longer. Product description & advantages, customer feedback/testimonials, and payment data comprise the content of such a website. Visitors have only two options to choose from: either purchasing the product or leaving the website. The main drawbacks of this approach are the following:

• The credibility level is incomparably lower than multi-product dropshipping ecommerce stores have;
• SEO promotion is problematic since almost nothing can be changed/updated in the website content;
• Customer retention cannot be relied upon: as a rule, visitors never return back to single-page websites again;
• The choice of supplier is limited to a couple of companies;
• Hype/seasonal products are worth selling via such stores only.

All the above-mentioned shortcomings of both public profiles and single-page websites are fading away from fully functional dropshipping e-stores almost by default. Of course, building such dropshipping websites requires much more time and money, but the advanced options of dropshipping software represent business opportunities inaccessible to any cheaper alternative.

Must-have features of dropshipping software

Seemingly worthy dropshipping software can appear palliative if its functionality lacks one or another critical option. Like features for POD providers, the dropshipping software options have critical importance for doing successful ecommerce business. The following list of features shows what is compulsory for any decent dropshipping e-store.

Product search & import

The feature can be available in the form of either a native function or a third-party plugin. The latter variant is inherent in the majority of dropshipping SaaS solutions. An easy search across the entire product range can keep visitors on a website for quite a while. The longer the time dropshippers spend surfing across a vendor marketplace the larger the chance they decide not to leave it for other websites. The dropship vendor management software available on respectable marketplaces reflects their intention to retain visitors with properly arranged customer care.

Any product view should provide visitors with minimum stats including ratings, reviews, comments, price history, and the like. This is especially critical for dropshipping merchants who have to update their catalogs continuously. A quick import in bulk significantly adds efficiency to interactions between large marketplaces and dropshipping stores. Poor importing capabilities can discourage dropshippers due to pricing mismatch, wrong values, and other possible frustrating factors.

Listing management software

As soon as imported items appear in a dropshipper’s catalog their accurate listing should be performed with a corresponding function. Placing things in order implies their categorization, right? This is about highly optimized SEO-friendly content including comprehensive descriptions, properly processed images, thoroughly selected comments, etc. No matter whether the listing management option is in the form of either a web app or a plugin. The following features should be available in worthwhile dropshipping listing software:

• Pre-publishing SEO optimization;
• Online/offline image processing;
• Review management and import;
• Categorized product import in bulk;
• Cross-selling capabilities.

Order automation 

This is one of the most useful functions for contemporary e-merchants. They can hardly expect any business success without the ability to automate dropshipping orders. Manual order fulfillment is a matter of the past. The following features should be inherent in any up-to-date dropshipping automation software:

• One-click placement of orders to dropshipping vendors;
• Automatic adding customers’ data to the placed orders;
• Payment gateways with predetermined payment options when only authentication remains to be performed.

A lack of such automation features makes any dropshipping software solution unworthy of your attention.

Inventory management

The function contributes a lot to your reputation: your ability to deliver anything available in your catalog makes your customers believe in your credibility. Dropshipping inventory software should provide automated (or semi-automated at least) real-time management of stock balances. It can be arranged via some sort of subscription when dropshipping vendor portals regularly share their inventory updates.

The best scenario, however, implies a direct integration of an automated dropshipping store with a vendor’s inventory management system. This is when real-time changes of stock balances happen simultaneously in both catalogs. 

Automated price tracking

Such a feature facilitates dropshipping store activities in terms of meeting customer expectations. Since price remains one of the basic selective factors for the majority of consumer goods, tracking price variations is critical for any dropshipper. A lack of automated price updates leads to removing a dropshipping store from the list of actual offers. 

Tracking price changes manually is as time-consuming as ineffective. Vendors can change pricing more frequently than a dropshipper visits their marketplaces. Only an automated price-tracking feature can provide dropshipping software with sufficient dynamics to keep a dropshipping store always “fresh” in terms of a market situation…