Dropshipping and drop servicing: two terms that are closely related to each other and yet, they remain different. Two markets that are both well-established and popular. Which one is better? Which one is more profitable? Finally, which one to choose?
In this article, we’ll cover various topics and answer different questions, from explaining what dropshipping and drop servicing are, through their pros and cons, to at least trying to answer the question of which one is better. Is it a win for either side or a draw perhaps? Let’s find out.
Dropshipping and Drop Servicing Courses
Before we head straight into the details on how dropshipping vs drop servicing business models compare, it’s worth mentioning that there are courses for both options. For example, the worldwide-known website that features courses on nearly every subject – Udemy. There you can find ones for either of the models and if you’re lucky enough, you can get a nice discount!
Udemy is not the only place to look for courses though. If you type either “dropshipping course” or “drop servicing course” into Google search, you will be met by plenty of other results for various websites, like YouTube. Additionally, you can even find online courses for free! Even the same ones that can be found on Udemy.
What is Dropshipping?
Dropshipping is, to put it simply, selling items of a third party without thinking about the inventory. Basically, you partner with a supplier and sell items from their stock that you both agreed on.
The partner handles the shipping, fulfilling the order, and in most cases also the returns and warranty repairs. The only thing that you have to worry about is creating a user-friendly website, handling customer orders, and taking care of support. After purchase, the product is shipped to the client from the supplier’s warehouse.
It’s a very popular business model that has been with us from around the 1960s. Over the years dropshipping developed and expanded to finally become really popular and widely used around the world, as you can see in the image below.
Furthermore, the SARS-CoV-2 pandemic has unexpectedly hit the entire world, leaving it battered and bruised. It made its presence known on the markets as many people have been furloughed. However, it also influenced the trends as dropshipping became a side hustle for people or even their main source of income.
To further elaborate on that, the global dropshipping market is expected to reach over $590 billion by the year 2027.
There’s something though, lurking, rising up, ready to work with new entrepreneurs. It’s dropshipping’s little brother, also known as drop servicing! However, we’ll get to it later in the article.
How does dropshipping work?
The gears behind the dropshipping business aren’t that complicated. The way it works is you need to find a proper supplier first that will be responsible for providing the goods. When your deal with the supplier is set in stone, you can proceed to building your website.
There are different options when it comes to building the website. The most obvious and logical choice would be Shopify. It’s an e-commerce platform that allows you to open a dropshipping store. Additionally, you can customize it according to your needs.
You could also build your website from scratch using WordPress or use pre-existing WordPress themes. It all depends on you and how you wish to conduct your business. Experienced sellers could also think about migrating their store from Shopify to WordPress or WooCommerce, due to the fact that on Shopify you have to pay a fee for every transaction.
We mentioned some of the responsibilities you’d have to face while running the dropshipping business, one of those would be customer support. An efficient tool that would definitely help you with it is Zendo, which can handle customer queries, declutter your communication, take care of client complaints, invoices, returns and warranties all in one place.
Is Dropshipping Profitable?
There is no clear answer to that question. Like any other business, dropshipping can be profitable if you sell the right products and if you run the company properly. You might wonder what makes the business perform well?
Unfortunately, it’s impossible to answer it clearly as different things work for different types of businesses. Although, let us share some tips that may help you with running your dropshipping store:
- When choosing a product to sell, choose a niche that has both good quality and high demand;
- Pay attention to more than just a price (try finding a product that can be offered with a lower price but at the same time has better quality);
- Aim for products with at least 20-30% profit margin; thanks to it you would be able to cover all expenses and have the rest for yourself;
- It’s generally better to have 100 clients buying products for $100 each than to have 1000 clients buying products for $10 each, as it can result in fewer potential refund problems, work, etc.;
- Sell seasonal goods or bundles of products;
- Provide outstanding customer support;
- Make sure that every description or image of the product is of the best quality.
Pros and Cons of Dropshipping
Like everything, the dropshipping business model has its pros and cons, but how do they compare? Are there more upsides than downsides? Or is it the other way around? Let us take a closer look.
- Can be really profitable if managed correctly (choosing best-selling niche products that people like, etc.);
- Thanks to the proper software and tools the business can be fully automated;
- No stock shortage or warehouse concerns;
- No need for having products at hand, due to the supplier taking care of them.
- Slow delivery time depending on the supplier’s location;
- Low profit resulting from choosing the wrong supplier or product;
- Potential issues with shipping that can end up in losing customer’s trust;
- Customer support issues, i.e. refunds or returns;
- High competition;
- No real influence on the product’s quality.
What is Drop Servicing?
Drop servicing, also known as service arbitrage, is a relatively new business model compared to dropshipping. It’s been climbing the mountain slowly but steadily, trying to dethrone dropshipping. Even though it’s still far behind, it’s a popular model for aspiring entrepreneurs.
It’s really important to know the difference between selling services vs products. The easy way to do so would be to remember that dropshipping sells a product and drop servicing, well, a service.
What you essentially do is outsource the task to someone else. That’s it! After you receive the work back from the partner, the only thing left to do is to check the service in terms of quality and how well it was made, and then simply send the service to the client.
When you choose a drop servicing business model, what you need to do is create a website using tools like Shopify or WordPress, customize it to your needs, advertise your services and look for clients, and lastly find partners to work with.
Speaking of Shopify, when it comes to drop servicing, the difference is that the website may not work so well due to the fact that it’s mostly used as a store for a dropshipping business.
What’s worth mentioning is that you should be careful while choosing a freelance partner. Make sure that the freelancer you chose has the required knowledge and experience to provide the service that you’re offering.
Is Drop Servicing Profitable?
Similar to the dropshipping business, drop servicing can be highly profitable if we succeed in the chosen niche, though the profit also depends on how well the freelancers do their job.
The success mostly depends on the niche, but how should you choose one? What to consider, which one would be best? Luckily for you, we have already covered the subject of the best drop servicing niches to get started with! Some niches worth mentioning are social media management, marketing/advertising, logo design, and more.
Since we’ve shared some tips before in the dropshipping section of this article, let us do the same here:
- Choose a niche that has a high demand;
- Pick the freelancers carefully, as the result of their work will definitely impact your business in a positive or negative way;
- Depending on the chosen niche, you can prepare a portfolio that you can present on your website to attract new clients;
- Have at least minimal background knowledge in the chosen field, though it’s not required;
Pros and Cons of Drop Servicing
Drop servicing is a business that may seem easier and less complicated than dropshipping, though it also has its own advantages and disadvantages. Let’s dive into them right away!
- Doesn’t require plenty of money to start;
- Requires no experience or skill beforehand, though it’s always better to have some background;
- You don’t have to worry about shipping and every process related to it because there’s nothing to ship, as drop servicing doesn’t include products;
- Easier and less complicated than dropshipping;
- More flexibility;
- Easy to set up with Shopify or WordPress;
- You are in charge of setting rates for the services you offer.
- Low customer satisfaction due to deadlines not being met by the third party;
- High competition;
- No involvement in the development;
- Communication problems resulting from different views, time zones, language barriers, etc.
Drop Servicing vs Affiliate Marketing
Before we proceed to the main event of the evening – The Clash of Titans, let’s take a look at an interesting comparison between drop servicing and another tempting business model that is affiliate marketing.
Why is affiliate marketing mentioned in the article about dropshipping and drop servicing, you may ask? Well, it’s because both drop servicing and affiliate marketing are easy businesses to start with. Even though they differ in some aspects, they’re still a common choice for a beginner. According to the statistics, the affiliate market in the United States alone is predicted to reach $6.2 billion by the year 2022!
When comparing the two, affiliate marketing is a much more experienced business model. It’s a model that has been proven to work (for example Amazon Associates), though getting such a business started requires more time and patience than drop servicing. You would also need more experience, as affiliate marketing can require some skills in content writing, ads, and more.
When it comes to the budget, drop servicing will be cheaper to start with if you decide on using ads for affiliate marketing. If not, affiliate marketing might require less budget to start.
Of course, there are more examples of how the two businesses differ but our point here was just to mention affiliate marketing and how it compares to drop servicing.
The Clash of Titans!
The moment we’ve all been waiting for! The clash of the unconquered dropshipping model and the aspiring drop servicing business! Who will be the winner of this fierce competition?
And the winner is… Both! It’s a draw! I know, we’ve all expected some spectacular win of either of the models, but there’s really no way to tell which one is better and more profitable. They’re both great in some matters, while in others they have their own downsides.
However, now you should be able to tell which one you’d prefer judging by their pros and cons.
Dropshipping and drop servicing are definitely one of those business models that are worth taking into consideration, especially if you are an entrepreneur without previous experience in running a company. Here are some memorable bits that could be of use:
- Choose a model that suits your preferences best;
- Pay attention to partner’s reputation and experience;
- Choose niches or products wisely to avoid potential money loss;
- If your drop servicing business isn’t profitable, you can always try a different niche;
And here we are! We compared both business models, enumerated their pros and cons, and even had a clash of titans!
To sum everything mentioned in the article up, it’s safe to say that either of these online business models is a reasonable choice. It’s really all up to your preferences and needs. Though bear in mind that running such a business is by no means a walk in a park, as it most likely can and probably will come with challenges and obstacles.
If you’re still hesitating, take your time. Analyze niches, look for trends, search for profitable ideas. After all, Rome wasn’t built in a day.