Dropshipping and drop servicing are both eCommerce business models that need relatively low startup capital and are designed to bridge the gap between consumer needs and suppliers of that particular product/ service.
Although both have quite some similarities and enormous earning potential, they operate in two different contexts. Dropshipping deals in physical products while drop servicing deals in online services.
Below, we are to analyze each in terms of pros and cons to decipher, which is better.
Drop servicing, also known as service arbitrage, is an e-commerce business model where you sell online services on your website but outsource the said work to a third party, usually freelancers, at a lower cost. The profit gained is the difference between what the client pays you and what you pay the freelancer.
To get buyers or clients to your website, you can deploy various strategies such as SEO, PPC, participating in forums, and Facebook groups. There are different freelance platforms such as Upwork and Fiverr, where you can get freelancers by posting a job description.
1. Low startup cost
Unlike traditional businesses that need high amounts of capital, you can start drop servicing with little to no money. One needs a few dollars to host a website to market the services and have a contact reference.
2. Recurring income
In most cases, when satisfactory work is delivered to clients, they provide more work, thus creating recurring income with high-profit margins.
3. High flexibility
Drop servicing can be done from anywhere in the world, as long as you have a laptop or mobile device and a secure internet connection.
4. No experience required
Since you will be outsourcing the work to freelancers, you don’t need to be skilled or have expertise other than some necessary business acumen.
5. Less risky
With no physical products to handle, there is less risk associated with drop servicing than retail business, since you will not have any shipping or logistical issues to address.
1. Late delivery
Late deliveries will tarnish your reputation as a reliable vendor. They usually occur when your contractors do not deliver work within the agreed time frame.
You will be limited by your expertise. Although you can set the prices for your services as high as you want, you won’t make any sales without relevant knowledge. For instance, you can’t offer sell medical transcription as a service if you don’t understand it. The same goes for lead generation and data entry.
Niches of drop servicing
The following are some of the drop servicing niches you can pick from
- Digital Marketing: you may offer services such as Search Engine Optimization (SEO), Google Ads, Lead generation, LinkedIn Ads, and content marketing.
- Writing: you may choose to write Blog articles, product descriptions, proofreading, Translating, Ad copywriting, and technical writing.
- Programming: offering services like WordPress development, Chatbots, Plugin creation, and Shopify customization.
- Graphic designing: offering services such as logos, brochures, business cards, banner Ads, and Photoshop.
- Social Media content and Management: under channels like Facebook, Twitter, Tiktok, and Instagram.
Dropshipping is an e-commerce business approach in which store owners process orders through third-party vendors or suppliers; the third-party drop shipping supplier takes responsibility for fulfilling the order to the customer.
1. Little capital is required
Compared to traditional retail stores that need huge amounts of capital to stock inventory, dropshipping requires little investment amounts, considering products are only ordered from suppliers after clients have purchased them.
1. Low overhead costs
With no need for warehousing, there are relatively low overhead costs compared to other business models
2. A wide selection of products to sell
There are over 1 million dropship products with wholesale prices from the suppliers you can choose from to cover any niche of your choosing.
3. Easy to start and scale.
With drop shipping, you don’t need any inventory or products to start. All you need is to find the best niche, select products you want to sell, select your suppliers, create your website, and start spreading the word online. With a good number of orders, you can be able to scale and increase your marketing spend to reach a broader audience.
1. Limited customization and branding
Dropshipping offers little control over how the product reaches the client. You are left with little control with the branding and customization of the packaging, which in most cases, is done by the supplier. However, with wholesale2b, you can get branded dropship products that will create a great first impression.
2. Highly competitive.
With little startup costs and limited barriers to entry, many people joined the dropshipping business. This made it highly competitive due to the high number of drop shippers selling similar products. This, in turn, leads to low-profit margins as products are sold at a low price.
3. Inventory issues
Keeping track of available stock with the suppliers can be quite daunting as you may end up marketing a product that’s out of stock. This is, however, handled with Dropship Automation that will automatically sync any inventory changes with your supplier to keep your store up to date.
4. Supplier errors
Dropshipping carries a risk of clients receiving low-quality products, botched shipments, delayed deliveries, and packages with missing items. Unfortunately, it’s you that will be blamed for the faults as the client only deals with you and not the supplier. It’s imperative that you choose reliable suppliers backed with automated dropship order processing to avoid such scenarios.
Profitable drop shipping niches
Monitoring trends and constant research are needed to find the best niches for dropshipping. Below are some of the categories as of 2020.
- Fitness equipment
- Women’s fashion and accessories
- Phone accessories
- Home and kitchen equipment
- Yoga equipment
Which is better? It depends. If you have a fully dedicated dropship business partner like Wholsesale2b, dropshipping is the better option, since most of the technical aspects, such as order processing and shipping, will be handled for you. All you need is to pick an effective dropshipping tool today, and you’ll be well on your way to generating a lifetime of hassle-free revenue.