Is Dropshipping A Good Side Hustle? – Risky Or Not
By now, we all know that side hustles are the ultimate things people are looking for these days. Jobs are not easy, and some of them just do not pay you enough. Half of the American population is underpaid. Therefore, it is no surprise that people are keen on doing something that will fetch them a few extra bucks. But is dropshipping side hustle worth it?
Out of all the other options available, dropshipping is one of the most unique and yet challenging ways to earn money other than your job. But is it really a promising path to make money in 2024?
Allow me to further explain everything there is about the dropshipping side hustle. And then, you can decide for yourself if this is the type of side hustle where you want to invest your time and efforts.
What Is A Dropshipping Side Hustle?
Dropshipping is a method of order fulfilment that does not require the business to keep stocks of products to sell them. Instead, the store first sells the product and then passes the sales order to a third-party supplier. This supplier is then responsible for shipping the order to the customers.
Contrary to what you may believe, the dropshipping business is not the one where you can expect a lot of money in a short time span. There goes a lot of time behind establishing a successful dropshipping side hustle business.
Sure, it does seem like a lot of easy money. All you need to do is sell stuff from other people, and you get a good portion of your cut. However, when all the challenges, drawbacks, and day-to-day management start to factor in, it becomes far from what you define and easy. It is lots and lots of hard work.
However, when you make the correct approaches, you may still build a successful business model, but it may not happen as quickly as you anticipate it to be.
Is Dropshipping A Good Side Hustle Option?
Dropshipping may be a very attractive idea for a side hustle, primarily for those looking to begin an e-commerce business with very minimal capital. It is enticing because it lets you sell products without even investing or maintaining an inventory of your own.
However, the low-risk nature also suggests that dropshipping side hustle is a highly competitive business model. Success pivots on carefully selecting the correct dropshipping niches, crafting an online store that is unique and attracts more and more customers, and executing market strategies that are effective to make you stand out in the e-commerce landscape.
Why Does Dropshipping Sound Like A Good Side Hustle Option?
Before I scare you off with all the challenges and drawbacks that dropshipping has as a business, let me take you through the reasons why I think dropshipping is actually a good side hustle option to invest in 2024.
Anyone Can Start A Dropshipping Business
You do not need a degree from Harvard to start and succeed in a dropshiping business. There are very few barriers when it comes to entry.
“Low barriers to entry imply that there is little to prevent your business from entering the market.”
One of the things that every individual worries about before getting into a business is the high cost of investment. If you are entering a restaurant business, for instance, you would have to think about the rent, health regulations, tax, and much more. These are the kinds of things that you do not have to worry about when it comes to dropshipping. Since you are not required to maintain an inventory, you can take away the worry of taking a loan to purchase products to sell.
It Is Flexible And Allows You Freedom
Dropshipping allows flexibility to multiple aspects of a retail business. Firstly, your brand may operate from literally anywhere in the world.
You may work for just as many hours as you wish to with only a laptop from the comfort of your own bedroom, at a café, or even in the parking lot while waiting to pick the kids up from school.
“You can offer different types of products and change its offerings easily if market preferences change. So, if your buyers’ tastes change, you can just change your product —no biggie!”
Another thing that I am pretty fond of when it comes to dropshipping is how you do not need to stick to the age-old corporate way of working from 905. This makes this option even more convenient for stay-at-home mothers, college students, and kids.
If you have quite a lot of things on your plate at present and cannot work under a fixed schedule, this option is just perfect for you.
It Is A Good Way To Earn Money
There is a lot of potential in the dropshipping business only if you do it correctly.
“You could start making money within a few weeks. But— this is more like an exception rather than a rule.”
So, is dropping shipping side hustle really a good idea?
As per Andreas Koeing and Alexander Pecka, the selection of your niche can make or break the business. In their case, they settled on the niche of pets as pet owners have an extreme emotional attachment to their pets.
Their dropshipping business had already generated $500,000 each month in 2020. It has flourished since then and now earns around $10 million every year.
Hard Truths About Dropshipping Side Hustle
Well, it is time that I finally take you through the drawbacks of dropshipping and help you understand why they outweigh the advantages. While the whole process of dropshipping may appear simple and fun, it is easier said than done.
So, before you put in all your money towards a dropshipping side hustle, here are a few things that suggest it might not be such a great idea after all.
A Low Margin Of Profit
True, since you do not need to manage or stock your own inventory, the overhead is low. However, it is the same with the returns.
You put in less money; you get less money out. This means you have to do a lot of business just to make sure that you are staying afloat. Making a profit takes a back seat, primarily considering that a big portion of the money just goes to the supplier.
This low margin can barely cover the operating costs and expenses of advertising/marketing, maintaining the site, which includes SEO, managing the sales orders, and covering office hours.
The variables that you may use to predict the income are undermentioned. However, these variables may change depending on the situation and the industry.
- 20% margin
- 2% conversion rate
You may then calculate the working estimate by using this equation:
(Traffic X 0.02) X ( Average order value X 0.2) = Profit
Highly Competitive
The dropshipping business has the least number of barriers. Therefore, it is common for them to have high competition. There are always going to be over-optimistic entrepreneurs who solely focus on the “low overhead” part and choose to ignore everything else.
Because you need very minimal capital to start a dropshipping business, the competition you are going to face is fierce, with some of the most popular markets suffering way more than others. Technically, the larger the company is, the more it can lower its markups to offer the customers the lowest prices. To make things worse, there is a chance that you do not even have an exclusive deal with the suppliers.
This means that any number of competitors might be selling identical products. And, if you are just beginning as a small business, your competitors with lots of experience have the kind of resources that you don’t need to lower your prices.
This means the potential customers can purchase the same product from some other seller, and that too for a lesser price. So, what would convince them to purchase from you?
Least Control Over The Supply Chain
In standard e-commerce, when the customers complain about the quality of the product, return policies, or fulfillment speed, you may address the problems all by yourself. You get to exercise that much control over the actions of your business.
In dropshipping, however, the owners of the store are kind of at the mercy of the suppliers. But you are the one who directly has to ask the customers.
Dropshippers are generally trapped, doing just a little more than hoping that the suppliers give importance to the problems while at the same time reassuring the customers that certain things are out of their control. Over that, there is also a communication interruption as the drop shipper has to go to and fro between the supplier and the customer. If even one of them becomes slow, the entire communication process comes to a halt, and the issue fixing takes even longer.
And if they are vocal about it, especially on social media, those negative reviews that early may end your business even before it can get started.
Legal Liability Issues
Although this may not be a very common issue for drop shippers, it is worth mentioning them, too. Some suppliers are not as legitimate as they promise. Also, you do not know where the merchandise arrives from.
Even more misleading is when the suppliers illegally make use of trademarked logos or intellectual property of other companies, which is a more than average occurrence.
This is a potential problem that can be rectified with a strong Dropshipping Agreement Contract. This is not something that inexperienced dropshippers would be aware of. It is something you need to keep in mind when you are choosing the suppliers for your business.
Tough To Build A Brand
Like behind-the-scene songwriters or ghostwriters, dropshippers need to understand that the entirety of their work will be passed on to someone else. If the product you are selling exceeds the expectations of the customers, they will take time to applaud the brand and totally overlook the entire shopping experience. After all, it is not your logo that is on the box.
Again, that is just another motive why dropshipping makes a lot more sense for well-established brands in comparison to the new ones.
The Correct Approaches To Dropshipping Side Hustle
Dropshipping side hustle makes more of an interesting sideshow than the main event itself. While its faults make it difficult to support a business on its own, it still provides more than enough benefits to help e-commerce brands improve their business largely.
You may consider these four approaches to use dropshipping pretty effectively:
Market Research
Dropshipping is a better means to an end. It is not the end in itself. Make use of dropshipping to mitigate the risks in trying out newer products and use it to do market research.
Rather than raising the cost of inventory by packing the warehouse with unpredictable products, test it out with a trial period by using drop shipping.
Protection From Overselling
Experienced e-commerce companies know that fluctuations in the market are not always predictable; rather than increasing the costs of inventory by overstocking to meet the unlikely maximums, having a dropshipping supplier as a backup plan would save you money without having to lose out on the sales.
Strategic Shipping Systems
One unlucky consequence of expanding a business is the complications that come with shipping. The more you move out from your fulfillment centers or warehouses, the more shipping fees and costs you’d have to incur. Dropshipping is the perfect solution. Here you’d not have to worry about the shipping or delivery of the product to customers.
High Maintenance Products
It takes more to stock and ship some products in comparison to others. In a few circumstances, it may be more profitable for you to dropship than storing them yourself.
The Bottom Line
Dropshipping side hustle can be a very useful tactic when you apply it correctly. But the reason it doesn’t properly work is because the newer companies become a lot less relevant compared to the bigger brands.
For instance, a well-established company will already have a good flow of traffic. They will not have to worry about establishing itself as a brand. That is the main reason why dropshipping makes a great complement for most e-commerce companies.
For More Business Related Articles Click Below!!
tags
upasana sarbajna
Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.
