Can You Make Money with Dropshipping? – What are the Risks?

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I have received a few reader emails in which I’ve been asked the same question, “can you make money with dropshipping and is it worth the risk?”

Dropshipping is a popular online business model and it attracts many people due to its low start-up costs.

Yet, like any business whether online or offline, there are risks involved. I’ll cover what I feel are the biggest risks for dropshippers.

Why the Dropship Model?

make money with dropshipping

So many people have opened their own dropshipping stores. It is not surprising when you consider that dropshipping is one of the lowest cost businesses that you can start.

Dropshipping doesn’t involve buying any inventory up front. Unlike most retail stores, you do not have to worry about storing products in a warehouse or in your home.

You also don’t have to worry about shipping and handling. Your dropshipping suppliers handle all of that for you.

When a customer places an order on your store, you then place the order with your supplier. The supplier ships the item directly to your customer.

The difference in price between what you charged your customer and what your supplier charged you is your profit.

Dropshipping enables you to place a wide range of products in your store. Imagine if you had to buy all of the inventory to do that.

It would cost thousands of dollars to do so.

Where to Find Dropshipping Suppliers

The most common method for finding dropshipping suppliers is to search on the web. However, it is a very tedious process.

Some dropshipping suppliers have specific requirements and fees to begin dropshipping with them. An easier process is to use a legitimate dropshipping directory.

An even easier solution is to use the AliExpress website.

Many dropshippers utilize AliExpress because there are no requirement or fees to begin selling products.

They have over 200,000 exporters and most products come with free shipping. A majority of products are offered at low prices which helps increase your profit margins.

Make Money with Dropshipping – Is Dropshipping Profitable?

If there is one thing you can find online, it is dropshipping success stories.

People all over the globe with little to no experience have been able to create another stream of income online with their dropshipping stores.

Some have even replaced their full-time jobs.

The Risks Involved with Dropshipping

dropshipping risks

Like any business, dropshipping does have its risks. Compared to other online businesses, the risks are still relatively low.

You don’t have to worry about tying up your cash in products that may or may not sell. However, there are still some risks to consider which I will cover below.

Choosing the Wrong Niche

I consider this a risk because you can waste a lot of time in the wrong niche.

Imagine spending days, if not weeks building your store around a specific niche only to discover there isn’t much interest in the products that you’re selling.

It is best to do niche market research before building your store. Another option is to order a custom dropshipping store from AliDropship and let the experts there select your niche for you.

They specialize in building dropshipping stores and are highly experienced in doing niche market research.

Advertising Costs

This is likely the biggest risk for any dropshipper. Your goal is to make more money than you spend in advertising costs.

There is a learning curve when it comes to paid traffic. As a new dropshipper you risk spending a lot of money until your store becomes profitable.

Here is a screen capture of one dropshipping store’s monthly advertising costs:

advertising expense

In order to have the best chance at success, it is a good idea to learn as much as you can about how to advertise on specific platforms.

For example, many dropshippers advertise on Facebook and Instagram. Learning and mastering one ad platform can help to increase your rate of success.

Suppliers Not Shipping Items On Time or At All

As a dropshipper, you are relying on your dropshipping suppliers to ship items to your customers in a timely manner.

Over time, a customer not receiving their item is bound to happen. Whether it is the supplier’s fault or the item is lost during shipping, you will get complaints.

Complaints lead to refund requests. Both are things you will have to deal with. Providing the best customer service is always essential.

One way to prevent this issue from happening is by choosing suppliers from a reliable resource.

For example, if you use AliExpress as your product supplier, you can view user ratings and reviews about each supplier.

You can use these ratings to determine whether the supplier is worth working with.

Lowest Cost Way to Start Dropshipping

dropshipping expenses

You have a variety of options when it comes to opening your own dropshipping store. One popular option is to use Shopify and the Oberlo app.

However, there are monthly fees associated with each service. Shopify’s basic plan starts at $29 per month and Oberlo starts at $29.90 per month.

That is $60 per month to operate a dropshpping store on their platform. A lower-cost option is using WordPress and the AliDropship plugin.

AliDropship has all of the same features as the Oberlo app but without any recurring monthly costs. You can even order a turnkey custom dropshipping store and have your store within a matter of days.

There are other services that will open a dropshipping store for you that work with AliExpress. However, it is important to ask two questions:

  1. Are there any recurring monthly fees to use the software?
  2. Will you retain 100% ownership of your store?

Store ownership is another risk to consider. When you use a third-party eCommerce platform, you give that particular service the ability to close your store at any time for any reason.

That isn’t a concern when using WordPress for your dropshipping store.

In Conclusion

There is no question that dropshipping can be a profitable online business model. It is important to understand what risks are involved before starting.

I still consider dropshipping to be one of the lowest cost online businesses that anyone can start. It is also low risk compared to other types of online businesses.

Start off on the right track by choosing the best niche for you by doing niche market research.

If you are not sure how to do so, consider outsourcing the creation of your store by dropshipping professionals.

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