Is the Dropshipping Business Model Right for You?

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Dropshipping (or drop shipping) is an eCommerce strategy where the seller (you) lists items for sale online but doesn’t physically possess the stock. The manufacturer or distributor (dropshipping supplier) manages inventory and handles order fulfillment, and you only pay for an item once your customer has placed an order.

You’re essentially a storefront, while partners handle the more labor- and capital-intensive aspects of the business. This setup makes the dropshipping business model is an excellent way to build an online retail business with limited startup financing. While there are clear benefits, the dropshipping business model isn’t suitable for everyone or every business. Here’s how to decide if it will work for you.

dropshipping business model

Entrepreneurs who should consider dropshipping

The dropshipping model can be a good fit for you if:

  • Your interest is in selling products, not designing or manufacturing them.
  • You want to start small.
  • You’re self-financing your business, so you don’t have a lot of capital to work with.

It’s not free to start a dropshipping eCommerce business. If you have time and skills, you can save money by doing your own photography, building your website yourself, and using tools like social media for viral marketing. 

However, you’ll need some cash to pay for web hosting, product listings on marketplaces or eCommerce platforms, and possibly software (though free eCommerce software options are available). In addition, be sure to budget time and money to deal with customer service issues and returns.

Business owners who shouldn’t follow the dropshipping business model

Dropshipping eCommerce may not pair well with your business if:

  • You have an idea for a unique product. To sell your items, you’ll need to invest in manufacturing and holding stock.
  • Your goal is to build a brand. Because of the nature of the dropshipping business model, these products are rarely white label, so you’ll need a different eCommerce model if you want brand recognition.
  • Robust profits are vital to your success. Sourcing your merchandise through dropshipping will give you thinner margins.

Building an online empire? Then, you may want to consider other business structures outside of dropshipping. To achieve this dream, you’ll need to make (or at least private label) your products to stand out from the crowd.

dropshipping business model

How to start a dropshipping eCommerce business

Might drop-shipped eCommerce be a good business model for you? If so, Red Stag Fulfillment has created a comprehensive dropshipping guide to help you get started. 

For eCommerce enterprises with more traditional business models, Red Stag Fulfillment provides premier services to help you grow and scale. If you’re looking for top-notch eCommerce fulfillment, give Red Stag a call.

Find out how optimizing your fulfillment can grow your brand

More about the dropshipping eCommerce model:

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