Why choosing an online store subscription model is a fatal business idea and how the dropshipping model even worse exacerbates problems?
In recent years, online stores in abonament and dropshipping have gained popularity. Many people believe that it’s a simple and quick way to make money on the internet. However, reality quickly verifies these hopes, causing most of such ventures to fail within the first few months of operation. This article focuses on the negative aspects of online stores in abonament and dropshipping models and explains why they are fatal ideas for building a stable and profitable business.
1. Online stores in abonament: The illusion of simplicity and low costs
Choosing an online store in abonament often tempts with its simplicity and low entry costs. These platforms promise quick setup, intuitive management, and no need for technical knowledge. Unfortunately, these advantages are illusory and lead to a series of problems:
a) Lack of ownership over the store
In the abonament model, the online store does not belong to you – you only use the platform on a rental basis. When you stop paying the subscription fee, your store disappears along with all its content. You have limited control over your website and cannot transfer it to another platform without significant complications.
b) Limited development possibilities
Abonament platforms offer standard features that often do not meet the individual needs of your business. Want to implement a new feature? It may turn out to be impossible or require an expensive premium subscription.
c) High long-term costs
Although the initial subscription fee seems low, it far exceeds the one-time cost of creating a private online store in the long run. Moreover, additional features often require purchasing more expensive plans, which can significantly burden your budget.
2. The dropshipping model: Huge competition and no real profits
Dropshipping may seem like an ideal solution for beginners. No need to invest in a warehouse or worry about logistics – just accept orders, and the supplier will take care of the rest. Unfortunately, reality looks very different:
a) Extremely low barrier to entry = huge competition
Dropshipping attracts thousands of people because it doesn’t require significant financial investments or specialized knowledge. This causes an oversaturated market with stores selling identical products. The competition operates on the same wholesale platforms and prices, leading to a price war that cannot be won without reducing margins to zero.
b) Lack of control over product quality and customer service
In dropshipping, it’s the supplier who is responsible for product quality, delivery time, and customer service. Unfortunately, problems with product quality or delayed shipping negatively impact your reputation. Customers blame your store, and you have limited options for intervention.
c) Poorer prices than in stores with their own warehouse
Wholesalers never give dropshippers such discounts as online stores that buy larger quantities of goods for their own inventory. This causes dropshipping to lack the chance of winning a price war against companies owning their own warehouses.
d) Very low profitability
Dropshipping margins are usually small, meaning you need to sell an enormous number of products to achieve noticeable profits. After deducting advertising costs, payment commissions, and potential refunds, profits often turn out to be meager.
e) High risk of failure
Statistics speak for themselves: most dropshipping stores fail within the first three months of operation. The main reasons are low profitability, high competition, and lack of opportunities to stand out in the market.
3. Why the dropshipping model doesn’t allow building a sensible business?
Building a stable and profitable business requires control over products, margins, and customer service. In the dropshipping model, all these aspects are outside your control:
* You don’t build brand value: Dropshipping stores rarely offer unique products, causing customers not to identify with your brand.
* You lack competitive advantage: You sell the same products as dozens of other stores.
* You can’t scale your business: Low profitability prevents investment in development and marketing.
4. Alternative: Online store with its own warehouse
Instead of investing in a dropshipping model, consider creating an online store with its own warehouse. Although it requires larger initial investments, it offers much greater opportunities:
* Better purchase prices: Wholesalers offer significantly higher discounts to companies buying larger quantities of goods for their inventory.
* Control over quality: You have full control over product quality and customer service.
* Building a brand: You can invest in marketing, develop your product range, and build trust with customers.
* Scalability: Higher profitability allows investment in business growth.
