Dropshipping in 2023: Does it work? Pros and cons

Dropshipping in 2023: Does it work? Pros and cons

Claudia Roca

Aug 12, 2022

Aug 12, 2022

Aug 12, 2022

Dropshipping in 2023: Does it work? Pros and cons
Dropshipping in 2023: Does it work? Pros and cons
Dropshipping in 2023: Does it work? Pros and cons

Still not clear about the business idea you want to go for? We understand how complex it can be for you to choose one model or another, that's why we decided to enlighten you with this article.

Dropshipping might be the option that makes your life easier. Many experts point it out as the ideal business because you can sell anywhere in the world without inventories or large logistics.

The dream of every entrepreneur is to be able to save on logistics and inventory issues, to make everything easier to carry out and, of course, to have as few losses as possible.

You will know all about this and more in this updated conversation about dropshipping. 

What is dropshipping?

Creating an online store is one of the most powerful trends of 2023. Yes, since the pandemic we've realized that selling to many parties from home is a more than interesting option.

Although digital stores require a lot of work and require you to manage logistics that are not easy to implement. We're talking about suppliers, government procedures, taxes and customer service.

It's normal that all ventures pose these challenges ... but there's one venture that has more advantages than others and that is Dropshipping. 

It's based on a virtual commerce model in which you as a seller do not need to store a large inventory to make money, since a wholesaler is in charge of doing it. Three agents are involved here: the marketer, the customer and the wholesaler.

When you as a seller receive an order from your user, you contact the wholesaler and he takes care of shipping it to the consumer. As a result, you receive a commission for the sale made.

5 advantages of dropshipping

Dropshipping offers multiple benefits that you should evaluate before making a final decision: 

1. Minimum initial investment.

This is the first advantage you will find with dropshipping. In most cases when you want to set up a digital store you must make a substantial investment in items such as:

  • Website.

  • Hosting.

  • Payment processor.

  • Web design.

  • Inventory and logistics

Which costs a lot of money, although costs have been greatly reduced in recent years. Dropshipping, on the other hand, does not require a large investment because you rely on the infrastructure of a third party.

The only thing you will do is invest in a small digital system offered by platforms such as Wix, in addition to registering as a freelancer because you now have a formal business.

2. 0 infrastructure

Just thinking about buying or renting a warehouse to store your inventory gives us a headache. Dropshipping saves you all this trouble, so we could even say that it's a much better model for your health.

Remember, it's the wholesaler or supplier who is in charge of shipping, product dispatch and manufacturing. You won't have any infrastructure because you are "only" in charge of connecting the customer with the factory. 

Have you heard of the win-win model? Well, this is a perfect example. 

3. You rely on your supplier's stock

Closely linked to the previous point. Once you partner with Dropshipping suppliers you avoid the need to invest large sums of money in inventory.

Now your supplier's stock is yours too, so you will sell the volumes you want without worrying about what's in your warehouse. 

4. Forget about logistics

Logistics is a complex sector in which you have to negotiate with many agents.

Courier companies, customs, tax authorities, customers and much more. Everything will be your wholesaler's problem, so you won't have to worry about anything.

5. No problems with the customer

Do you know what is one of the most complex problems of digital stores? Customer management, especially when there are complaints and returns.

The latter can drive any entrepreneur crazy, because you have a responsibility with a user that you must assume. The good news is that with dropshipping you will not have a problem with it.

The supplier himself takes care of returns and basic user service. This doesn't mean that you will forget about the user, but you'll only be like a link between the consumer and the manufacturer.

5 disadvantages of dropshipping

Like any venture, dropshipping has disadvantages that you should evaluate before giving the final yes: 

1. Low profitability

The truth is that dropshipping is good business because it solves many challenges that exist from the moment the product leaves the factory until it reaches the user.

In dropshipping, as the wholesaler is in charge of almost everything, your profitability as an associate is usually low, which means that the only way you can make a living from the activity is by moving high volumes, something that is not so easy.

2. Inconveniences with customs

Yes, it's true that one of the advantages of the model is that you can sell products and services to multiple countries without having stock, but that is also a disadvantage.

Each country has different regulations and finding a wholesaler that works in your territory is not so easy, so in many occasions there are problems when the shipment arrives. 

Here it's important to read all the terms and conditions of the contract to make sure which nations they deliver to and what guarantees they offer that the product will not be held up in customs. 

3. Untimely deliveries

When you have a digital store everything depends on you and it's a great advantage because you offer a better service to the user. Now, with dropshipping you forget about this, but it also adds a new problem.

If you have a customer who is outside the country where the wholesaler resides, it's very likely that the product won't be delivered within 24 or 48 hours. There is an estimated time frame, but it's not always met.

This causes discomfort with the user and as he bought thanks to your recommendation you will have to communicate with him to offer excuses about what happened.

The solution to the issue is to make sure that the supplier is 100% responsible and has experience in the sector. Check which countries they deliver to in order to give your customer peace of mind.

4. Non-negotiable transportation

When you negotiate with your wholesaler, he has already negotiated all the elements that influence the business, including transportation.

This means that you can't choose another shipping company because the supplier already has an agreement in place. So you will have to abide by the price and modality they have without being able to do anything about it.

5. Responsibility

We cannot forget about the irresponsibility of some suppliers. 

It is vital to do your homework before deciding on one option or another. Today there are several options in the market that have proven to be consistent between what they say and what they do. That is where you have to aim.

Forget about innovative projects that offer you great returns. Dropshipping requires time and effort to create a solid and stable business.

what is dropshipping

What do you think, do you think dropshipping is the right business for you? Let us know in the comments. 

Remember that in the blog we have a lot of information for you if you are starting as an entrepreneur.