Our Shopify dropshipping review shows you the pros and cons of the business model. We also give you valuable pointers on how to improve your chances of success. Shopify is a popular ecommerce platform with over 2.1 million active users daily. It accounts for over $444 billion in economic activities worldwide with more than 4.8 million online stores using its services.
Interested entrepreneurs who want to learn and master Shopify dropshipping can take up programs, such as Drop Ship Lifestyle by Anton Kraly and BeyondSixFigures With Justin Woll. Otherwise, they can also look up free courses from YouTube and Udemy.
The dropshipping business model itself has many flaws and so you have to navigate it carefully. I know this from experience since I used to own a Shopify dropshipping business years ago. Today, I run a local lead generation business which, for me, is the easiest way to make passive income online.
Shopify Dropshipping Pros & Cons
Shopify dropshipping has pros and cons. As a dropshipper, you want to know what to expect when you use the platform. Here are some of the common advantages and disadvantages you can experience firsthand as you establish and run your ecommerce business using Shopify.
6 Pros of Shopify Dropshipping
Low Start Up Cost
Building your dropshipping store on Shopify requires a low startup cost. For example, you can avail of the 3-day free trial if you want to test the platform You can later upgrade to the premium version by paying $1 per month for the first 3 months. To continue using the service, sellers can go for the Basic option, which costs $25 per month.
Users can even save further when they choose to pay per year because Basic pricing goes down to $19 per month. Other additional expenses for setting up a Shopify store include:
Pro Tip: Be prepared to lose money initially. It might take extensive research and multiple testing before you can find winning products. Unfortunately, some dropshippers eventually give up when they do not earn their investment back in a few months.
Quick Launch Times
You can set up a dropshipping store in Shopify is really easy since it doesn't require coding or any technical knowledge. The site's tools can help you create and launch your shop in as little as a few hours to a few days. Some of Shopify's main features include drag-and-drop tools for online storefront creation and customizable templates for brand building.
Pro Tip: Go check out the Shopify App Store to access more apps and take your shop to the next level.
No Inventory Requirements
As a business model, one of the biggest advantages of dropshipping is that you don't need to purchase any stocks or worry about inventory management. You can easily start selling on your Shopify store as you find and list products from reputable dropshipping suppliers.
As such, you don't have to spend a ton of upfront capital to start earning. You also avoid the risks of getting stuck stuck with merchandise that do not sell. Instead, you forward customer orders to your supplier, who handles the entire order fulfillment process - from packing the items to shipping them to recipients.
How To Decide On What Products To Source
Pro Tip: Your goal is to find and sell trending products. Look for ones that solve a problem or fill a gap in the market. Also, be quick to jump into action, so start with product sourcing before the niche becomes saturated with numerous sellers.
Better Cash Flow
Dropshipping appeals to people who might not have much money to invest upfront. As mentioned, you won't need to buy a bulk of inventory or worry about storage and warehouse fees. The business model easily takes most of the traditional operational costs out of the equation, so its easier to manage your cash flow.
Pro Tip: Profit margins are typically lower with dropshipping than traditional retail. You have to track the expenses, revenue, and profit of your Shopify dropshipping business to manage your finances better. Use software like CashFlowTool for this purpose.
Easy to Scale and Grow
Shopify dropshipping allows you to sell to anyone anywhere in the world. There's no limit to how many people can visit your online store. According to their website, the platform makes it possible for business owners to "sell more products, lower costs, and save time."
Scaling is about moving past one-time sales. Start looking at backend sales and focus on recurring sales from qualified buyers. Set up email sequences offering extra products not available to every buyer, such as premium priced items and special promotions.
Pro Tip: Investing on Facebook Ads, Google Ads, and influencer marketing can help you promote your products and scale your Shopify business faster. Use Google's Keyword Planner to come up with ads that bring you closer to your potential customers. In addition, you can also tap free marketing methods (such as social media and email marketing) to boost your traffic and increase your sales.
Fast Way to Test Products
Your Shopify dropshipping business allows you to the flexibility to test products without investing huge bucks. In addition to reading product reviews online, you can also buy sample products from your chosen dropshipping supplier. That way, you can inspect product quality firsthand before you sell them online.
Pro Tip: In any case, you want to consider products that invoke logic and emotion, are unique and hard to find, and have a high perceived value. Preferably, the trending product should belong in a niche market that isn't heavily saturated yet.
6 Cons of Shopify Dropshipping
Low Profit Margins
In general, the dropshipping business model brings low profit margins for business owners. In fact, most drop shippers only make between 10% to 20% profit from each sale. So which products you sell and how you price them can dictate your overall earnings as well as your success or failure. You need a pricing strategy that coincides with basic factors like:
Pro Tip: If your country supports it, use Shopify Payment to accept payments online. This option eliminates transaction fees on other payment methods, such as PayPal or bank transfers. In a way, this can help avoid expenses that reduce your potential profits.
Competitive Market
The dropshipping market has become extremely competitive. As the number of sellers continues to increase yearly, scaling your Shopify shop can be a real challenge. Moreover, DemandSage also reports that around 4.80 million live online stores across 175 countries use the Shopify platform.
Pro Tip: Study current market trends and your competitors' strategies. Invest time on product research and always be on the lookout for affordable yet credible suppliers. By doing so, you can position your Shopify store as a strong alternative for buyers looking for the best deals online.
Easy To Duplicate
Another common issue with Shopify dropshipping is that it's easy to duplicate profitable stores. In a YouTube video, 7-figure ecommerce entrepreneur Austin Rabin shares how dropshippers can "copy a successful Shopify store ethically." He then proceeds to demonstrate how he duplicated the online store of Jaxxon, a jewelry brand earning over $5 million per month.
Austin also adds that while he's not encouraging dropshippers to steal a store's entire format, it's acceptable to use them as inspiration. "Put your own spin and twist on it and your own brand voice and brand marketing angles," he points out.
Pro Tip: Use high-quality photos for your product listings. Focus on building your brand to establish a unique store that will be hard to duplicate.
Lack of Control Over Product and Supplier Issues
You also experience lack of control over product and supplier issues as a dropshipper. Since you're not handling inventory and order fulfillment, your business relies on your supplier's performance. You have no control over product quality and availability.
Choosing a supplier from China has been the standard with dropshipping but this method isn't sustainable in the long term. It can lead to equal supply chain issues and shipping delays, which can directly affect customer satisfaction. Ultimately, choosing a bad supplier could strip your store of credibility and sales. In some cases, it may even force you to shut down, so finding a legitimate supplier is definitely a must.
Pro Tip: Consider both local and international suppliers for your Shopify dropshipping business. In addition to China-based AliExpress and Alibaba, you can also check out directory sites (SaleHoo, Inventory Source) and dropshipping services (Sunrise Wholesale, Wholesale 2B). Go read our feature on the best US dropshipping suppliers for more ideas.
Limited Branding Ability
As a long-term business model, dropshipping has become increasingly unsustainable. It's becoming harder for small brands to compete in a saturated market. Traditional dropshipping stores don't always look legitimate, so going against big brand names is never easy.
Ideally, the goal is to establish a brand in a niche with a large community to capitalize on organic traffic. As you find a niche with a passionate audience, you can eventually concentrate on building a strong brand around a winning product.
A branded store usually brings better conversions, cheaper ad costs, increased word of moth advertising, more repeat customers, and higher social proof.
Pro Tip: Hire experts to do website and logo design for your company. While there are free tools to do these, it's still a better idea to tap professionals to make your Shopify dropshipping business stand out..
Customer Service Issues
“Businesses can grow revenues between 4% and 8% above their market when prioritizing better customer service experiences”. Bain & Company
For any dropshipper, one of the most common dropshipping mistakes to avoid is around customer issues with refunds and returns. Unfortunately, you're losing money every time you refund an item. You also run the risk of chargebacks or getting shut down by payment gateways. So, you need to have a clear refund and returns policy on your site.
Also, customers aren't willing to wait weeks for shipping and you can lose buyers if you fail to meet expectations. According to a Voxware study, 69% of consumers "are much less or less likely to shop with a retailer in the future if an item they purchased is not delivered within two days of the date promised."
Pro Tip: Look at your suppliers' return policy (on the footer of their website). Find information about their restocking fee (average is 10% to 20%), return window (or how much time does a customer have to return a product), and how they handle damaged items. Make sure your buyers are aware about these details as well.
How To Start With Shopify Dropshipping In 2024
Starting with Shopify dropshipping in 2024 has become much easier, compared with previous years. The low barrier to entry makes the process fast and trouble-free. Plus the Shopify platform is user-friendly. As create your store on their platform, you can avail of the free 3-day trial and then spend $1 per month for 3 months. Eventually, you'll have to pay $19 t $25 per month to use their Basic services.
As you utilize Shopify in building your business, use consistent color themes for your online store. Also, make sure to have high quality images and detailed product description on your product page listings.
General Store or One-Product Store
Some dropshippers find it effective to start with a general store. This allows them to test a variety of products from different niches. It's also saves them more time and money, compared with building multiple online stores. For the most part, the purpose of a general store is to find your winning product. Once you have a hot ticket item that reaches $100,000-$200,000 in sales, it's a wise idea to take it off your general store. Build a one-product shop around it to establish better branding.
To scale to a one-product shop effectively, conduct thorough product research and understand your target niche market. Run market-specific ads to attract continuous traffic for your business. Focus on customer loyalty and retention to build a sustainable one-product dropshipping store.
Conclusion: Why I Quit Dropshipping And Why Lead Generation Is A Better Business Model
Shopify dropshipping can be a quick way to start an online business without needing a significant investment. Anyone can immediately begin selling products in a short time frame. However, it's a challenging business model with only 10% to 20% success rate.
As a former Shopify dropshipper myself, I found the whole business model to be difficult to manage. The profit margins can be really low, plus I had to spend lots of money on Facebook adds to drive traffic to my store. On top of that, supplier prices change often which made things tricky on my end, so I decided to quit.
I eventually focused on running a local lead generation, which is a more lucrative and stress-free business model. With local lead generation, you simply build websites from scratch, rank them in Google, and then rent them out to business owners once they start attracting organic traffic.
In short, you are not a middleman between a supplier and a customer. Instead, you are a digital real estate owner who's in full control of your business and earnings. Case in point, one of my clients pay me $2,000 per month for the traffic and leads they get from my Grand Rapids tree care website. Since I own over 50 of these lead gen sites, I make up to $52,000 monthly providing the same service to various businesses.
If you want a sustainable business model that can bring you passive income in the long run, lead generation is your best bet.
Shopify is a great platform to get started on if you're a beginner. I like the ready-to-go store templates that they have for free, and the paid options are good also. Plus with Oberlo you can start a dropshipping store and fill it with tons of products. All that's left is driving traffic to it.