Is dropshipping passive income? The short answer is ‘no’ but that depends. There are setups where dropshipping can be passive income but in general, any eCommerce business is a business and therefore not really passive in any way shape, or form.
There are a lot of moving parts to any online store. If you sell physical products then you will always have inventory to deal with which in itself can be a full-time job. Dropshipping makes it easier but it most certainly requires some level of babysitting.
The idea of dropshipping most certainly sounds like it is an easy business to run but anyone who has done it for some time will tell you otherwise.
Because you have no real control over the products you are selling it requires a lot more management and you need to stay on top of your suppliers if you want to keep your dropshipping business alive.
What Is Passive Income Anyway?
Passive income is money you earn from something that you are not actively involved in every day.
Typically it is something you have invested in once or where you’ve done the work once to create an asset that keeps earning money day in and day out without your active involvement.
The term passive income comes mostly from the world of investing. If you invest in a rental property that is positively geared then you will keep earning the rental income every month.
If you invest in stocks that pay a dividend then you will keep earning the dividend without doing any active work.
In the online world, the closest thing you can get to passive income is probably affiliate marketing. You can create a blog or a Youtube channel and you earn commission from ad revenue or affiliate sales from the work that you have done once.
In some cases, you can keep earning affiliate commissions for years after you’ve done the work just once.
This is also true for creating and selling online courses or digital products where you can set it up and it will keep running almost on complete autopilot.
In my opinion, any business is most certainly not passive income. A dropshipping business where you sell physical products requires your constant involvement and is therefore not passive in any way shape or means.
You most certainly can build a team that runs your dropshipping store which will make it more hands-off but it is still a business that requires daily work.
Why Dropshipping is Not Passive Income
A dropshipping business has a lot of moving parts. Not having control over your inventory can take a lot of management hours especially if you are sourcing your products from Aliexpress.
There are a lot of reasons why a dropshipping business is not passive income but these are the 3 main reasons:
How do you get traffic to your store? If you buy ads from Facebook then just managing that requires daily management. Creating new ads, optimizing existing ads, testing new creatives ec.
The same goes for managing ads on Google or Pinterest or any other platform you may be using.
It most certainly is not passive since you have to maintain some sort of positive ROI and that requires a high level of work – something that is not easy to outsource and still see a decent ROI.
If you are doing SEO and rely on free search engine traffic it is definitely more passive. Search engine traffic is slow to grow though and getting it to a point where you see decent amounts of traffic requires a lot of upfront work.
Free search engine traffic to your dropshipping store is most certainly the most passive you can have this part of your business.
Order fulfillment is a big part of your day-to-day tasks in running a dropshipping store. If you use Shopify and Oberlo or Woocommerce and Alidropship then this can be automated to some degree.
It is definitely one part of your dropshipping business that can be outsourced fairly cheaply as it requires very little skill or decision making.
If you do dropship from China then most of your man-hours will go into customer support. The slow shipping times tend to spark a lot of customer support tickets and even if you warn your customers of shipping times beforehand they are still impatient.
Customer support can be outsourced but you need someone with a particularly good touch with customers if you dropship from Aliexpress.
They can source almost any product you can find on Aliexpress and their shipping times are usually 5-10 days to the USA which is at least twice as fast as Aliexpress.
Ultimately you want to either warehouse your own products in the USA or you want to find a USA supplier. I highly recommend Spocket as a USA supplier.
How To Set Up Dropshipping To Create Passive Income
So, back to the original question, is dropshipping passive income? While traditional dropshipping from China most certainly is not passive income there are ways to do dropshipping that is almost completely passive income.
The way to do this is with print on demand. Print on demand is a dropshipping model where you create designs that will be printed on to apparel products. You simply provide your print on demand supplier with the designs and they take care of the rest.
There are a lot of POD suppliers who have Shopify apps and you can plug it straight into your Shopify store.
If you rely on ads to drive traffic to your store then you will still have that side of the business that requires a lot of work. You will also have to either make the designs or get them made but in theory, you only do this work once to keep earning from it over and over again in the future.
There are two ways to make a print on demand dropshipping business almost completely passive.
1. With Shopify and Printful
Printful is my POD of choice simply because of the quality of products and prints they produce. They are more expensive but the reason why I prefer them is simple.
Because of the high quality of products and prints, you will almost never have to fend off customer support tickets for poor quality.
This greatly reduces your active involvement in running the dropshipping store.
The next piece of this passive income dropshipping model is traffic. You do not want to spend your days doing Facebook Ads or Google Ads. Its just too time consuming and can be incredibly stressful because you always have to manage your ROI.
Targeting the right keywords is essential to be successful with this strategy. The easiest way to do this is simply to use a tool like SEMrush. Pick keywords with a low difficulty score below 60% and it will be fairly easy to rank for.
The thing about Shopify and SEO is that it takes a bit more work in getting set up. You need more content in your product descriptions and you need to build your products around the low competition keywords that you found with SEMrush.
Then it just takes time. It can take up to 6 months to really start seeing decent traffic. Once this kicks in your store will be virtually passive and require very little management and maintenance.
2. With Etsy and Printful
If SEO is not your thing and you don’t have the patience then you can simply switch your focus to Etsy. Etsy has a huge marketplace with hungry buyers.
The Etsy game is very different to doing SEO but there are similarities in accessing competition. If you target the right audience on Etsy you can build a substantial business with very little daily grind work.
Setting up an Etsy store does take work. Printful makes it incredibly easy to create your products as you can push the mockups of your products straight from Priuntful to your Etsy store.
Printful will take care of most of your store for you. They will fulfill orders and ship them out and even post the tracking numbers back to Etsy.
This is definitely the most passive you can make a dropshipping store in my opinion.
Dropshipping Passive Income – Conclusion
To make your dropshipping store passive income you will need to move away from running ads or dropshipping from Alixpress. Both those pieces of the puzzle require a hard grind – daily.
If you already have traffic from a Youtube channel, a blog, or even a Pinterest account then you are sitting on a pot of gold. By using a print on demand service like Printful you can easily create an apparel store that is virtually hands-free to run.
Creating and selling information products is of course an option but that is a topic for another day and for another blogger to write about. Selling physical products requires your active involvement in the business.
Find good and reliable suppliers in the USA can also help you make it more of a passive income business. If you can find a great company that sells great products and offer fast shipping then you can greatly limit the amount of daily work and input required into your dropshipping business.
In the end, it all depends on your needs and ambitions. Do you want to build a brand and grow it into something big or do you just want lots of smaller more passive businesses chugging along and with very little work?
Either of these will require work but opting for a more passive income will require a lot of work initially but once it is set up you can simply move on to the next project and ear from it for years to come.