Is dropshipping worth it? What fashion retailers need to know

Posted 30 May 2022 in GUIDES, Uncategorized by wholawholesale

Dropshipping is a retail fulfilment method that has flourished over the past few years. It involves purchasing products from a third party and shipping them to the customer directly without keeping any stock.

In 2019, the dropshipping industry was worth over $160 billion. According to THIS MARKET FORECAST, it’s set to quadruple its worth by 2027, at around $600 billion.

OK, but what do these big numbers mean? If you’re in the process of setting up your own online fashion business, should you consider dropshipping as a viable PRODUCT SOURCING method?

Dropshipping may seem like a fail-safe idea at first glance and a sure way to save money in overhead costs. But before you jump into it, you should be aware of the risks involved.

In this article, we’ll explore the pros and cons of dropshipping so you can make an informed decision when STARTING A CLOTHING BOUTIQUE. What’s more, we’ll talk about the best alternatives to dropshipping, such as buying from a wholesaler and stocking your own inventory.

Whola is a wholesale marketplace that makes it easy for online and offline fashion businesses to buy hot-selling inventory with just a few clicks. SIGN UP NOW and start shopping for the newest styles from our 100+ unique Australian brands!

WHAT IS DROPSHIPPING?

Dropshipping is a retail structure where you never stock or handle any products yourself. Instead, you purchase products from a dropship supplier at a discounted price. The shipping process is handled by the same supplier, who ships it directly to your customer.

Technically, you are selling someone else’s products and sharing the profits. You don’t participate in the manufacturing, storing or shipping processes. You simply handle the customer orders.

Here’s a simple breakdown of how it works:

You find a dropship supplier and add the products you want to market to your website.
A customer orders the products from your online clothing boutique at your marked price.
You pay the supplier their price for the product, keeping a small profit.
You forward the order and the customer’s delivery details to your supplier.
The dropshipping supplier prepares the order and ships it to the customer on your behalf.

Sounds simple and fuss-free – so what’s the catch? Let’s go through the pros and cons.

THE PROS OF DROPSHIPPING FOR FASHION RETAILERS

LOW BARRIER TO ENTRY

One of the main pros of dropshipping is that you don’t need a big budget to start selling clothes and other fashion items online.

Since you aren’t buying in bulk and you don’t need to store or ship anything, your costs are low. You only have to be in charge of your online RETAIL STRATEGY since the products are stocked and shipped by your dropship suppliers.

LOW RISK

As a business owner, buying stock that you may not be able to sell can seem like a risky game. Especially when you’re just starting out and you don’t know your market, your CLOTHING NICHE or your CUSTOMER AVATAR that well yet.

With dropshipping, you have room to experiment with different styles and brands without having to invest in stock. There is no risk of dead stock negatively impacting your bottom line.

REDUCED OVERHEAD COSTS

As you aren’t taking part in the manufacturing, shipping and storing, there is no need for you to invest in renting a warehouse or paying staff to manage orders.

Dropshipping also completely eradicates the need for a physical shop. No physical shop means no costs associated with rent, staff wages, maintenance or utilities.

You can find more about the cost-effectiveness of online stores in our article on ONLINE VS. OFFLINE CLOTHING STORES.

THE CONS OF DROPSHIPPING FOR FASHION RETAILERS

LIMITED CHOICE OF BRANDS

Despite the “dropshipping boom” of the past few years, most of the best AUSTRALIAN CLOTHING BRANDS don’t offer dropshipping. This is simply because they don’t have to – their products are in-demand and they can sell them through their network of retailers.

So, if you choose to dropship, you’ll be limited to companies that offer this order fulfilment method (for example, big Chinese dropshipping suppliers like AliExpress). As a result, you may not be able to stock the type of products that your customer avatar really wants.

NO CONTROL OVER PRODUCT QUALITY

Since you don’t take an active part in the manufacturing, storing or shipping of products, you cannot control the product quality. It’s all up to your supplier.

It’s hard to find a supplier that you can trust completely to deliver products that reach your customers’ expectations. At the end of the day, the dropshipper works on your behalf. If there is any dissatisfaction, it’s your business that takes the hit and your reputation that gets damaged.

LOW PROFIT MARGINS

With dropshipping, you have to buy items one by one as the orders come in. This means you lose out on the bulk discount prices you get when BUYING WHOLESALE CLOTHING FOR RESALE.

Also, retailers who use dropshipping tend to price their products as low as possible, which will oblige you to do the same to compete with them.

Add to this the fees you pay for packaging and shipping, and you’re left with a tiny profit margin.

SLOW SHIPPING TIMES

When you use dropshipping, you have no control over shipping times. Your supplier may even run out of the products you market, which can cause serious shipping delays.

Since so many people are involved in the dropshipping cycle, there’s a lot of room for error, and every mistake causes a chain reaction. When the dominoes topple, your customer will receive their order late, which leads to dissatisfaction.

POOR CUSTOMER EXPERIENCE

Although your dropshipping supplier is in charge of a large proportion of the retail process, you are in charge of the customer service.

If there is any problem with an order, customers will come to you. Since you’re not managing the shipping process yourself, it can be difficult to give your customers the answers they’re looking for.

This often leads to poor customer experience and lowers the likelihood of a customer purchasing from your store again.

COSTLY RETURNS

Dropshipping is not as cheap as it seems: in fact, there are many hidden costs.

For example, returns can get extremely expensive when products are shipped overseas. Or, if your client orders two products from two different suppliers and returns both of them, you must pay both shipping fees.

These unexpected expenses can really cut into your profit.

HEAVY COMPETITION

Because the dropshipping market is dominated by a handful of big suppliers, it’s likely that your competitors use the same supplier and sell the same products as you.

Competition is fierce, and you have limited opportunities to reinforce your brand and make your business stand out. Even customised packaging is out of the question because you never actually handle the products you sell.

THE BEST ALTERNATIVE TO DROPSHIPPING: WHOLA FASHION WHOLESALE MARKETPLACE

Fortunately, dropshipping is not the only way to source products for your clothing store. You can avoid many of the disadvantages listed above by simply opting to buy from fashion wholesale marketplaces like Whola.

Whola is an Australian B2B fashion wholesale that allows you to stock fast-selling styles without the risks and headaches of dropshipping. Let’s explore some of its benefits!

SHOP 100+ UNIQUE AUSTRALIAN BRANDS

The Whola fashion wholesale marketplace offers a wide range of more than 100 unique AUSTRALIAN CLOTHING BRANDS carefully selected by our team of fashion professionals. We only stock fast-selling styles so you don’t have to worry about getting left with dead stock.

SHIP PACKAGES YOUR WAY

Directly purchasing your products from a wholesale marketplace like Whola gives you control over the quality of your service from beginning to end. You can choose the shipping company you want to work with instead of relying on a dropshipper.

TEST NEW STYLES BY BUYING SMALL PACKS

We have no minimum order quantity, so you can buy as many products as you need, whenever you need them. Order 3-unit packages and test new styles and brands without making a significant investment.

MAKE SURE YOUR STORE STANDS OUT FROM THE COMPETITION

Whola also offers geographic exclusivity on specific styles in our marketplace. This means that if you have a physical store, you’ll know if a competitor in your area already stocks the products you have your eye on. As a result, we can guarantee you’ll be one-of-a-kind wherever you are.

GET STARTED WITH WHOLA NOW.

CONCLUSION: IS DROPSHIPPING WORTH IT?

Dropshipping may seem like a great option to get started, but only if you’re willing to take all the risks listed above.

If you have your heart set on dropshipping, make sure you write a solid RETAIL BUSINESS PLAN and find a top-quality dropship supplier that you can trust.

For most blooming entrepreneurs, we recommend choosing a wholesale marketplace like Whola. Our platform is easy to use and we provide 24-hour support so we can help you with all your fashion buying needs.

FAQS ABOUT DROPSHIPPING FOR FASHION RETAILERS

HOW PROFITABLE IS DROPSHIPPING?

The average profit margin when using the dropshipping retail model is between 15%-20%. However, your profit largely depends on your shipping costs and shipping costs vary depending on the location of your suppliers and your customers.

WHAT IS THE DOWNSIDE OF DROPSHIPPING?

There are quite a few downsides to dropshipping. These include having a limited choice of brands to market, slow shipping times and a poor customer experience. The dropshipping model forces you to rely on other people rather than yourself and there’s a lot of room for mistakes.

IS DROPSHIPPING DEAD IN 2021?

No. In general, dropshipping is still profitable in 2021 and is set to grow for at least the next 5 years. However, many fashion retailers are beginning to realise that working with wholesalers is a much better option in the long term, as they can save you from the many risks that dropshipping involves.