What is dropshipping, and is it worth it?

Dropshipping is the business industry’s hottest new trend. But what is it, is it worth it, and is it the right business model for you? Here’s how you find out…

As a fast-growing ecommerce business model, dropshipping lets you ship items directly to customers once an order is placed. The logistics is handled by your chosen dropshipping supplier rather than having to keep stock in your warehouse.

We will give you a helping hand with our thorough guide into dropshipping. From understanding the benefits to how the process works and identifying the best dropshipping suppliers, you should feel more confident about becoming a dropshipper by the time you reach the bottom of this page.

What is dropshipping?

Dropshipping is a retail fulfilment method for ecommerce businesses where a third-party organisation manages the logistics of manufacturing, warehousing and shipping for you, saving you the hassle of sorting it all out.

This order fulfilment option allows you to outsource the whole ecommerce process from start to finish. For example, when you receive an order from a customer, you then send it to another company which will ship it to them on your behalf. This means you can start a business and sell products without the need to rent warehouse space or manage inventory. Many simply need a TikTok account to start dropshipping.

And don’t worry – dropshipping is completely legal in the UK. It’s viewed like any other kind of ecommerce store. As long you’re abiding by all applicable sales and consumer protection laws, you’re good to go.

A great example of dropshipping is Gymshark. Instead of keeping mountains of products stored in a warehouse, items are directly shipped to customers by a supplier when an order is made.

How dropshipping works: a step-by-step guide

The dropshipping process is fairly straightforward and usually follows these steps:

1. You create an online store displaying the products you wish to sell.
2. When a customer makes an order, you contact the supplier, either manually or automatically.
3. The supplier then packs and ships the products directly to your customer.
4. The supplier gets the base cost of the item, but you profit from the difference between this and the price set in your e-commerce store.

You need to create an online store to start dropshipping

Shopify is our #1 pick of online store builder if you want to start a dropshipping business

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Setting up an online store for dropshipping

A crucial first step is to choose an ecommerce platform suitable for dropshipping, which you’ll use to build your store. Just ensure your platform is compatible with your chosen dropshipping app.

There’s a few other factors to add to the equation, such as your budget and how much experience you have with platforms like website builders and content management systems.

If you don’t want to build a full online store, you can also use social media platforms like TikTok or Instagram for dropshipping. This gives you access to an instant, ready-made audience to sell your products to and, if you have an online store too, social media is a powerful channel to exploit alongside your website.

Finding a dropshipping supplier

You can start a store for almost anything you can think of these days, from phone cases to partyware – there are suppliers for everything.

Once you’ve decided on what you want to sell, you can start shopping around for dropshipping suppliers. We’ve collated a few below, and some are recommended based on the specific website platform you’re using.

Do dropshippers really make money?

There’s no doubt that dropshippers globally are making money. Whether or not the average Joe is one of them, however, is a different matter. Dropshipping can be incredibly lucrative, but it’s a highly competitive market and only the best seem to see any real success.

A lot of your success will depend on scale and time. It takes a keen eye to know what products will be profitable and potentially push them further with advertising. You’ll also need to be making sure your supplier can actually deal with larger demands in the case of a particularly popular product.

Significant time is needed to build a brand around what you sell in order to build trust and familiarity. This ensures that customers have loyalty to your store over the thousands of other dropshipping stores out there.

A lot of people go into dropshipping thinking it will be a ‘get rich quick’ scheme and don’t put enough effort into these two crucial aspects. The industry is not without its fair share of failures.

How long might it take to start making money?

According to Shopify, it takes about a year on average to build a dropshipping business that generates an average full-time income – but for some people, it can take as little as a few weeks. This often depends on how much they knew of the industry and the size of any audience they had beforehand.

Make sure that you give yourself a grace period before celebrating too hard and spending all your profits. As with most businesses, there will always be some people who want to return items, and these requests will often have to be resolved and come out of your profits.

Beware of relying too much on your profits if they do well in the future too, because online sales are largely inconsistent and hard to rely on as a sole source of income.

Can you lose money by being a dropshipper?

If you don’t prepare your dropshipping journey with as much knowledge as you can, you will almost certainly lose money. A common mistake most new dropshippers make is failing to choose a good niche.

Another way you might lose money is by purchasing your own products at least once to test quality and how fast they are delivered to ensure that your supplier is reliable.

You may also need to verify your business with your online banking providers before any influxes of huge profits lead to your account being flagged for suspicious activity.

What profits can dropshippers make?

There’s no limit on how much money you can earn this way. Success stories like Irwin Dominguez from San Diego prove this –  a high-earning dropshipper who made $1,000,000 in profit within eight months.

As we mentioned above, finding a good niche will have a big impact, as some products are much more profitable than others.

A higher price point decreases the amount you’d have to sell, and that would also have an impact in gaining more profit.

Here is an example of the type of profit you could make. If you sold 25 phone cases a month at £80 and deducted the supplier’s wholesale price of £20, that would put you in the market of the average dropshipper’s profit range – a potential earning of £18,000 in a year.

You can make a rough estimate based on a 20% margin and 2% conversion rate, but you need to factor into your profit calculation that your discount from wholesalers might be less than 20%.

How can you be successful at dropshipping?

With the right drive, mindset and tools at your disposal, you can potentially succeed with any new business, and dropshipping can be no exception.

However, you need to seriously consider if you are truly passionate about the time and effort it will take to build this business type. The biggest hurdle can often be finding and securing a good supplier to get your business going.

Once you’ve overcome that, you’ll need to actually launch your brand new online store, your chosen range of products, and ideally have the beginnings of an incredible brand.

The great part about dropshipping is that it’s a pretty sturdy business model during a recession. Because of the low upfront costs, you have enough to keep you afloat as soaring inflation and costs make life hard for other types of businesses.

How much work is dropshipping?

Depending on the levels of success you want to reach, the level of work, time and expertise will be different.

If you’re looking for your dropshipping venture to be a small side hustle on your lunch breaks or after work most days, it can be a good source of extra income.

However, doing it this way has a greater risk of failure due to all businesses needing strong commitment to them – especially in the beginning stages, and this leaves you with more lost costs than earnings.

If you want a breakout brand that reaches high numbers, it’s going to take a lot of work – it isn’t something you should begin lightly.

While you don’t have to keep stock, dropshipping still has all the other needs of a business – and unless you have enough money to hire a team to help you, it will involve you being the driving force behind everything including content, promotion, brand strategy, budgeting and operations.

Alternatives to dropshipping

Whether it’s because you think the dropshipping market is saturated or you think it’d be too logistically complicated for you to ace, here are a few dropshipping alternatives to try:

Print on demand (POD)

This is a fulfilment model that lets sellers design graphics for products. Once you receive an order, all you have to do is tell the manufacturer what to print on the product (t-shirts, mugs, tote bags – you get the idea) to then ship it to the customer. This is easier to set up than traditional dropshipping and there’s just few upkeep costs, mostly because the products you print on can be pretty cheap.

Pro: you have creative control over the designs
Con: you can’t check the physical product before its sent to the customer

White labelling

This model allows you to sell product markers with your company’s brand. This can be done by putting your company’s logo on the product and packaging. White label products are generic products manufactured by a supplier that are rebranded for multiple brands. In this case, the competition will be less of a worry since no one will sell the exact same product.

Pro: you can create a easily but your branding on a product
Con: the products are generic so you won’t have a unique selling point

Drop servicing

This is an online business model that involves selling a service to a client and then hiring someone else to do it for cheaper so that you can make a profit. This can be anything from designing logos to doing an SEO analysis of someone’s ecommerce store.

Pro: if you’re organised and have lots of contacts, it can be a simple way to make money
Con: hiring someone else to fulfil the service means there is more room for error or setbacks

Final thoughts: is dropshipping worth it?

Throughout this article, we discussed how dropshipping works, the best platforms for dropshipping, the type of money you could stand to lose or gain, and whether or not all of it is worth it.

There are positives and negatives to consider when starting a career in dropshipping. There’s really no upper limit to the potential profit you can make – but the downside is that it takes more work and effort than most people imagine, especially when first starting out.

Overall, by having a strong awareness of what you’re about to get into, understanding the strengths and weaknesses of the business model and knowing that it is not a ‘get rich quick’ scheme: anyone could achieve a viable dropshipping business with some hard work and dedication.

Written By

Stephanie Lennox Writer

Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things ‘entrepreneur’ in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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