Today we will talk about the hard truths of dropshipping in 2021. Dropshipping business models never require the product to be in your stock. You are never involved in the shipment or delivery of the product. That's an absolute dream of every businessman, but this method has eventually gone downhill. We will cover those hard truths that every person has to know before entering this space.

If you scale, the profit margin will be low.

You already know that dropshipping could be lucrative and very profitable. You don't touch the inventory, and you just do the marketing. It's an easy method, and everyone can do it, right? Well, there is another side of the business. When a businessman scales dropshipping brands on an advertising platform (like Facebook, Instagram, Twitter, etc.), they won't see high-profit margins again. For instance, you can get a $5 profit on each product if you sell a few products. When you scale to 50-100 orders per day, then you'll need to lower the profit, and it will lead to lower margins - that's a fact. 

You may see that products on Aliexpress are $10-$20 cheaper than products on Amazon, but in the end, you'll need to lower your profit margins (check the image below - you see that Aliexpress has the lowest prices on products but to scale business, you'll need to reduce the profit margins).

Competitive method - complicated to build a brand from it

Not a surprise that dropshippers find it hard to build a brand solely with the dropshipping method. When you can quickly jump from one product to another, it's getting harder to build a brand on it. For instance, if we focus on health and beauty space, millions of products are on Aliexpress related to that category. So, it's tough to find a particular winner. Yes, you'll find the winner's product but after testing tens of them. When you are a brand, you should promote each of your products equally - it's impossible with dropshipping because with this method you are looking for profit margins, not brand effectiveness (check the image below - Aliexpress has tons of various products in the health and beauty niche).

People need very little capital to start a dropshipping business, so it's a competitive space. When the entry requirements are low, you have to expect a big competition.