Is Dropshipping Dead? Can You Still Earn Through It in 2019?

Dropshipping is an order fulfillment method that does not require a business to keep products in stock. Instead, the store sells the product, and passes on the sales order to a third-party supplier, who then ships the order to the customer.

 

The Right Approaches to Dropshipping

Dropshipping makes a better sideshow than the main event. While its faults make it hard to support a business on its own, it still offers enough benefits to help ecommerce companies improve their business substantially.

Consider these four approaches to using dropshipping effectively.

1. Market research.

Dropshipping works better as a means to an end, not the end itself.

Use dropshipping to mitigate the risk in trying out new products and used for market research.

Rather than raising your inventory costs by packing your warehouse with an unpredictable product, test it out with a trial period using dropshipping.

More than just discovering if it sells or not, you’ll also have a better estimate of how much it sells for, giving you a more accurate number of what quantity to buy for your initial stock.

This is doubly important for trying out new product types, which always carry inherent risk.

For example, maybe you’ve been quite successful at selling dog products. Would that translate well for cat products too?

That could be hit-or-miss, but you can always test the water by dropshipping a few products and see how it goes.

2. Protection from overselling.

Experienced ecommerce brands know that market fluctuations aren’t always predictable. Rather than raising inventory costs by overstocking to meet unlikely maximums, having a dropshipping supplier as a backup saves you money without losing those sales.

This is especially useful for seasonal overflow.

It’s a great safeguard against the uncertainties all retailers face.

Having dropshipping options in place also makes great insurance against extreme circumstances.

If something like a natural disaster happens to your warehouse, you can still fulfill pre-made orders by dropshipping the products from elsewhere.

The same holds true for side-stepping surprise shipping delays.

3. Strategic shipping systems.

One unfortunate consequence of expanding your business is shipping complications. The farther out you get from your warehouse or fulfillment centers, the more shipping fees you’ll incur.

Dropshipping can be the perfect solution for some problematic locations that fall outside your profitable regions.

• Maybe shipping that far costs too much, or maybe storage prices are too high to justify setting up a new shipping center.
• Maybe it’s an issue of taxes or extra fees, like when shipping out of the state or country. Relying on dropshipping for these select areas could be the determining factor in keeping you out of the red.

Moreover, just as dropshipping can be useful in market research, you can also use it to test new locales.

Why not use dropshipping for a trial period in a new location to see if it’s worth opening a new facility there?

4. High-maintenance products.

Some products cost more to stock and ship than others.

In certain circumstances, it may be more profitable for you to dropship them versus storing them yourself.

What do we mean by high-maintenance products?

Any products that necessitate extra fees for storing or shipping, such as:

• Large products — Some products take up so much space, their sales don’t make up the costs of the excessive storage room.
• Heavy products — If a product’s weight makes it cost too much to ship, try dropshipping from a manufacturer or wholesaler.
• Fragile products — Fragile products require special care when shipping. In these cases, the supplier or manufacturer might be better equipped to meet these requirements than you.
• Valuables — High-value items like fine jewelry, antiques, etc., require additional security that not all warehouses can offer. Rather than risking theft, you could leave the storage to someone who can adequately protect them.
• Special conditions — Maybe you want to sell items that need to be kept frozen, or materials sensitive to light. If your inventory needs special conditions, you may be better off dropshipping than storing it yourself.

Unless your entire company specializes in these types of products, it doesn’t make sense to pay additional storage and shipping fees for a small subsection of your business.

But you can still keep your customers happy by offering these products through dropshipping.

Dropshipping Done Right: A Case Study from Dark Horse Marine

Dark Horse Marine is a niche vendor — most people will never need to buy a stainless steel fortress anchor in their lifetime.

But Dark Horse uses that to its advantage rather than limiting themselves; they offer all sorts of rare products that only the kind of people who need anchors would be interested in.

They offer the “total boating solution,” everything from watersport equipment to boat-based entertainment systems to cartography tools. And their customers are thankful they can satisfy all their niche needs on one site.

Although Dark Horse sells on Amazon, eBay, Walmart, and Jet, they’re most proud of their personal BigCommerce site.

They’ve recently updated the site to be faster and more Google-friendly, and are already enjoying a bump in traffic and conversions.

According to company president Robert Matos, about 10% of their business is dropshipping.

When asked why he uses dropshipping, he cited a couple of the same reasons we listed above:

• Test out new products. Dark Horse tries to find the right balance between marine electronics and equipment. Because there’s no clearly defined border on what types of “marine products” his customers want, experimentation is a key part of his sales strategy.
• Large and heavy items cost too much to store and ship. Just because it’s fit for the ocean doesn’t mean it’s fit for the warehouse. Anchors are the very definition of “heavy,” and a lot of their boat outfitting equipment is large or otherwise cumbersome. Dark Horse dropships the high-maintenance items to cut storage and shipping costs — and reinvests that money into marketing campaigns.

The automation has freed up more time, which they’re putting to good use in other fields.

Matos further explained how one of the reasons dropshipping worked for his company is because he found excellent suppliers.

He’s using two suppliers at the moment, but is looking into additional ones.

The top priority for Dark Horse in choosing suppliers are keeping the products well-protected — vital for electronics — as well as their professionalism in upholding their business promises.

How to Choose the Best Suppliers

Whenever you include dropshipping into your sales strategy — in any capacity — you are entering a business partnership with the supplier.

Like we said above, as the vendor you are often at the mercy of your dropshipper for product quality, timely shipping, and even legal compliance.

That means you must choose them with the utmost care.

For one thing, you want to make sure that the products are as advertised, but you should also see if their shipping meets your criteria.

Outside of the condition of the products, there’s still plenty of concerns about how your supplier conducts business.

Here’s a quick-reference checklist of questions to ask yourself before signing on to do business with someone:

• How do they handle returns or damaged products?
• How long does it take them to fulfill an order, from sale to delivery?
• How is their customer support? (Feel free to test this yourself.)
• Do they insure orders?
• Do they offer fraud protection?
• Can you find reviews or references online?

Also don’t forget the Dropshipping Agreement Contract, explained above.

To help quicken your research time, we’ve previously compiled a list of the twelve most popular dropshipping suppliers.

The article reviews the pros and cons of each, so you can compare them and find the ones best for your needs.

Dropshipping for Beginners: FAQs

Are you new to dropshipping? Need some background before you decide how to incorporate it?

Take a look at these frequently asked questions, aimed at giving you a crash course in how it all works.

How exactly does Dropshipping work?

We mentioned this earlier but will go into a bit more detail.

Dropshipping is when a vendor fulfills orders from a third party and has them ship directly to the customer.

The vendor usually pays for the item at a discount by working directly with a manufacturer or wholesaler; their profit comes from the difference in the initial item cost and whatever price they sell it at.

The vendor does not store their own inventory or ship items directly. Instead, they focus mostly on marketing, advertising, and managing their online presence.

How do I incorporate dropshipping into my business?

As we explain above, we only recommend dropshipping as a complement to a traditional ecommerce business model.

Assuming you already have an online presence in one or more stores (or at least know how to set that up), incorporating dropshipping is similar to launching any other new product, with a few distinctions.

Here’s a quick step-by-step guide:

1. Research what products would fit well with your strategy, market, and customer base.
2. Research how your competitors are selling the product, namely pricing.
3. Find the best supplier (see our checklist above).
4. Finalize a fulfillment process that works for both of you and incorporate it into your system. Depending on your sales management software, this could be easy or require ironing out some wrinkles.
5. List and promote your new product. Be sure to specify any special conditions, such as changes in shipping times or locations.

Is dropshipping legal?

Yes, dropshipping is legal.

You may run into other legal issues depending on who your supplier is (as we discuss above), but dropshipping on its own is a perfectly legitimate method of order fulfillment.

Just remember to protect yourself with a Dropshipping Agreement Contract.

Is dropshipping allowed on eBay?

Yes, dropshipping is allowed on eBay.

According to the post in the eBay seller help section, dropshipping (which they sometimes refer to as “product sourcing”) is allowed, but the vendor is held accountable for a safe delivery in the time frame stated in the listing and for the customer’s satisfaction.

eBay even seems to encourage dropshipping. They say specifically that:

“you aren’t obliged to state in your listings that an item is coming directly from the supplier.”

Is dropshipping allowed on Amazon?

Yes, dropshipping is allowed on Amazon.

However, the Amazon Seller Central page on the topic lists two exceptions:

1. Using another seller’s name or contact information on your packing slips, invoices, etc.
2. Purchasing the products from another online retailer and having them ship directly to the customer (meaning you can’t buy the product online and enter your customer’s name and address).

Amazon also states that the vendor must be the seller on record for all documentation and fulfill all the responsibilities that come with it, such as returns.

What are some dropshipping product ideas?

If you’re interested in dropshipping but don’t know where to start, here’s a list of product ideas for inspiration. We tried to only list auxiliary items that could fit the product range of any industry.

• Tote bags supporting a cause or charity.
• Novelty t-shirts.
• Funny coffee mugs.
• Motivational bookmarks.
• Inexpensive watches or jewelry.
• Marketing merchandise (shirts, bags, mugs, pens, etc., with your logo).

Otherwise, see the section above on market research for a more personalized approach.

Executive Summary

We don’t want to give the impression that we’re against dropshipping — quite the opposite, we think it’s a highly useful tactic when applied correctly.

But the reasons it doesn’t work for new companies become less relevant the bigger a company gets.

For example, an established company already has a healthy flow of traffic and doesn’t need to worry as much about establishing their brand.

That’s why dropshipping makes a great complement for most experienced ecommerce companies — just don’t rely on it for the heavy lifting!