Dropshipping Benefits, Challenges & Getting Started
There are many ways of starting your own CBD business, and dropshipping is one such way. One of the early decisions anyone must make is how and where to source products. One does not essentially need to manufacture CBD products. One can buy CBD wholesale, procure CBD isolate, distillate, and make products.
Even better, one can just buy private label CBD or white label CBD products. These business models require very little understanding of CBD products and only small investments.
For example, white label CBD is quite a simple way of getting started. One just needs to ask the CBD manufacturers about all the products available with them, select the products, and ask manufacturers to label and pack products as per the requirement, and that is it.
However, all the above models have one issue, they require buying some stock. For example, in private label CBD, one may need to buy at least one batch of every CBD product, which is a considerable investment. On the other hand, in the case of white label CBD, one can buy products in smaller amounts, but still, every CBD manufacturer would have a minimum order quantity (MOQ).
Pros and Cons of Dropshipping: An All-In-One Guide
So, what to do, or how to get started if one does not want to maintain any CBD stock?
Well, there is a way out. You can even start a CBD business without buying a single unit of CBD product or investing a penny in stocks. Dropshipping is the simplest way of getting started.
It is the only business model in which a person can have a massive range of products, and yet one would not need to buy any stock. One would not need any place for storage. Not only that, one is not even engaged in product supply. And, yet, consumers receive products as if they were produced and shipped by you.
What Is Dropshipping?
It is the only business model where one can get started with no product stock. The methods are pretty simple. There are dropshipping companies. These may be CBD manufacturers, supplement producers, or even trading companies (often offering thousands of products).
They provide the price of the CBD or other products available for dropshipping. Then, you promote, market, and sell those products like your own products or brands. Once you get the order, you forward it two the dropshipper, and they will supply the product along with your invoice.
Here the customer would make payment to you or at your website. Thus, you will need to pay the dropshipper the basic cost of the product and shipping expenses. What is left after paying the dropshipper is your profit.
This business differs significantly from affiliate marketing, though it may share some of its traits. For example, in affiliate marketing and dropshipping, you have no say in product manufacturing or quality.
However, unlike affiliate marketing, where the customer is redirected to the seller’s website, and you get a commission from every sale, dropshipping differs. In dropshipping, you sell products as if they are your products, and you decide what should be the final price of the product.
In dropshipping, you have greater control over product margins. Moreover, since you are not redirecting customers and selling products like your own products, you can develop customer loyalty over time.
However, unlike private or white labels, maintaining the stocks, storage, and shipping of the products is no hassle. The dropshipper handles everything, and you only pay for whatever sales you make via your platforms.
Top Dropshipping Benefits
Dropshipping is not one of the most popular ways of doing business. In fact, most sellers on eBay and even many on Amazon are working this way. In addition, most sellers or resellers on these platforms are using the services of dropshipping companies. Below are some of the reasons why dropshipping is such a good business model:
- Low start-up costs: This is the number one reason why anyone would consider dropshipping. No stock maintenance also means zero investment in product stock and storage. In the case of dropshipping, products are lying with the dropshipper, and you have no obligations. Basically, you only buy the product to be supplied after getting payment from the client.
- Flexibility: This business model provides flexibility in many ways. You can get into the range of businesses, start selling different kinds of CBD products, and more. Since stocks are not with you, there are no pressures of selling them quickly to recover the investments.
- Massive range of products: Your range of products is only limited by the number of products offered by dropshipper. Thus, most dropshipper would have tens, even hundreds of healthcare products. In addition, a dropshipper may offer not only CBD products but also many other health supplements. To get started, you must decide your margin and list those products on your website. After all, there are no obligations in dropshipping and no investments in product stock.
Other dropshipping benefits
- No storage of products: In dropshipping, physical products always lie with the dropshipper, and they are also responsible for shipping the products. A good dropshipper would send your invoice along with the product so that customer has an impression as if you dispatched products. All this means there is no need to maintain a warehouse and stocks and requires less staff.
- Minimal efforts in inventory management: In dropshipping, inventory lies with the dropshipper and not with you. However, you still need to do some inventory management. The number of products with dropshipper may keep changing, and prices may change from time to time. So, yes, you would still require to do some inventory management. However, these are minimal efforts. Moreover, man dropshipper would provide automation software that can readily integrate into most common eCommerce platforms.
- Easy to scale up your business: Expanding product offerings is a considerable challenge in any business, but not with dropshipping. In the case of dropshipping, one can immediately start offering all the products that are with the dropshipper. Any dropshipper would have tens, hundreds, and even thousands of various products. Thus, one may start with CBD products but readily add other health supplements and even medical devices to the product profile.
Some Top Challenges Associated with Dropshipping
Dropshipping sounds too good to be true, and that is right. However, every business model has its downsides, and dropshipping is no exception. Here are a few of the downsides of this business model:
- Reliance on the third party: One of the biggest issues with dropshipping is that one is over-dependent on the third party. Just imagine that you have spent much effort and money developing your platform. However, one-day dropshipper decides to change their working condition or even close their business.
- Poor product branding: In dropshipping, you are selling products “as it is”. There is no control over how the products should look, what they must contain, and more. Dropshipper provides ready-to-sell products, but it also means no control over how the product is branded. Quite often, dropshipping products are a kind of product that has huge demand, but they would not offer niche products.
- No control over product lifecycle: In dropshipping, you may sell the products as if they are your own. But the truth is that those are not your products, and you have no control over the product lifecycle. It means that if the dropshipper decides to change product packing, its formulation, or even discontinue the product, there is nothing you can do about it.
Additional dropshipping challenges
- High competition: Since dropshipping does not require much investment, many people are using this model. Additionally, dropshipper offers products that are in high demand. However, such products are sold by so many other people. Therefore, you may struggle to differentiate your offering from the competition.
- Low margins: Almost no product investment also means you will have to be satisfied with low product margins. Products offered by dropshipper are not niche products; thus, there is no scope for massive margins.
- Low customer loyalty: Since you are offering products that are available on many other platforms, it also means low customer loyalty.
- Difficulties in providing customer support: You are not supplying the products or maintaining stocks. It means that providing customer support would be challenging if anything goes wrong. Dropshipper may take longer to deliver products, and there might be issues in getting product replacements.
Is Dropshipping Worth It for My Business?
It is a complex question. Every business model is good in one way or another. And every business model has its pros and cons. Some business models may be better for you.
Generally, dropshipping is an excellent business model for getting started quickly with no prior experience selling CBD or other products. It is also a low-risk model. It is also an excellent way to expand the product portfolio quickly.
However, it may not be the perfect way of doing business in the long run. If your sales pick up and your online platform becomes popular, you will realize that you need better products or niche products and provide better customer services. Moreover, if sales pick up, you can make more profit by using models like private label CBD or white label CBD.
If you are unsure how to start with the CBD business, we can help you out. We are a European CBD manufacturer and also provide many other services. Contact us to learn more about dropshipping, private label CBD, white label CBD, and more.