Dropshipping has now been around for many years and has grown beyond what most online business skeptics predicted. Still, if you are looking to invest in an online business model in 2022, you may be wondering; Is dropshipping still worth it?
It is certainly worth it. Dropshipping, when well-executed, can be a great opportunity to earn a decent income.
In this article, we expound on why dropshipping is worthwhile, its benefits, as well as how to overcome its challenges and excel as a dropshipping entrepreneur. Let’s dig into it, shall we?
Table of Contents
Why Is Dropshipping Worth It?
In dropshipping, you never have to handle any inventory. Instead, you set up an online store and list goods from your dropshipping supplier. When customers place orders, you share the orders with your dropshipping supplier, and they send the products directly to your customers.
To put it briefly, all you have to do is:
- Source goods
- Market them
- Coordinate the fulfillment of orders
- Earn your profits
The truth, however, is that dropshipping is not an effortless venture. It is just much easier to run than a typical brick-and-mortar or online retail store where you have to handle inventory and the fulfillment of orders on your own.
Further, most critics of dropshipping argue that it is now a saturated sector where competition is too high and the margins are too slim.
The problem with this statement is that it offers a very limited view of dropshipping. Are there saturated niches in dropshipping? Yes, there are but there are also lots of other niches that you can explore and make great margins. You simply need to be diligent with your research and keep up with market trends.
In a nutshell, it is safe to say that there are lots of opportunities to explore in dropshipping. Just because more people have ventured into it does not mean that it is fizzling out. You only need to find a way to make your dropship store stand out and be more responsive to the evolving needs of your customers.
The Trend of Dropshipping in Facts and Figures
It is one thing to simply say that dropshipping is worth it; those are only words. However, as we all know, numbers do not lie. So, let us discuss facts and figures to analyze whether this would be a viable business opportunity for you not just in 2022 but also in the long run.
In terms of financial value, the global dropshipping market was estimated to be worth over $128 billion in 2020 even amidst the pandemic. Multiple research studies further predict that it is likely to grow at a Compounded Annual Growth Rate(CAGR) of between 23.7% to 32%. This means that by 2026, the global dropshipping market may be worth over $450 billion.
Regionally, research data indicates that China and the USA are the leading dropshipping markets both in terms of market size and the value of goods traded via dropshipping in both countries.
Nevertheless, dropshipping is taking hold in countries in Europe, Asia-Pacific, the Middle East, and Africa. These regions are thus predicted to be new growth frontiers for dropshipping that dropshippers can lucratively venture into.
Extra Tip: these research studies also quoted toys, DIY tools and accessories, hobby items, fashion, and personal care as some of the high-performing dropshipping niches.
The Benefits of Dropshipping
Now that we have ascertained that dropshipping is worth the effort, let’s address an equally important question: what are the advantages of dropshipping?
1.It Requires Low Start-Up Capital
One of the impediments to starting a typical business is that you need a substantial amount of capital to get the ball rolling. In contrast, dropshipping requires very little cash for you to get started.
At the bare minimum, you need:
- An online dropshipping store
- A dropshipping supplier
- Advertising to drive traffic to your store
If you choose to dropship on a platform like Shopify, a basic subscription to set up your online store will cost about $29. You can then find suppliers on free-access platforms like Taobao or AliExpress, and use affordable platforms like Facebook Ads for advertising.
Assuming you spend about $100 on advertising, $29 on Shopify, and $70 for contingencies, your store could be up and running for $200. A fair deal, wouldn’t you say?
2.The Level of Risk is Minimal
In dropshipping, you do not have to store any merchandise. This means that even if sales are low, you do not run the risk of dead stock. Plus, shoppers pay for their purchases upfront so there is again no risk of them declining to pay.
The only risk you may face is on the supplier’s side. Customers may demand refunds if your dropshipping supplier does not fulfill their orders or if they receive substandard or damaged items. You can, however, minimize this risk by finding a reliable dropshipping partner (more on this below).
3.It Is Easy to Manage
Running a dropshipping store is mainly about coordinating orders with your supplier, keeping track of what products they have to offer, customer care, and marketing. Sounds like a lot doesn’t it?
Fortunately, almost all of these functions can be automated. There are lots of e-commerce tools that allow you to:
- Update the goods listed in your online store.
- Share orders automatically with your supplier.
- Keep track of what your supplier has in store so that customers do not make orders of products that are not available.
The only task you may have to perform manually is customer care. Which, all things considered, is a good thing because it helps you build a better relationship with your customers.
4.It Can be a Secondary or Passive Source of Income
Once you have mastered how to automate your dropshipping store, it will require very little day-to-day input. This would allow you to pursue other sources of income if you would like to.
For easy management, you can schedule brief check-ins at different times of the day to ensure that all is running smoothly or to answer customer queries. More time-consuming tasks such as sourcing new trendy products for your store can be set aside for days when you have more free time.
The Downsides of Dropshipping and How to Overcome Them
Like all business ventures, dropshipping is not perfect. So, for a balanced perspective, here are some of the dropshipping downsides to look out for and how to overcome them.
1.Successful Dropshipping Niches Can Be Highly Competitive
Successful business ideas are attractive because they promise great returns. As such, when a niche of products seems to be in high demand or selling at high margins, lots of dropshippers may flock towards it.
The increase in supply often makes competition stiff and can force you to cut down prices to make your store more appealing. In turn, you would lose the profitable margins and the niche could lose its allure.
A good way to avoid this would be to stay ahead of the pack. Enjoy the great sales of a successful niche while they last but if the niche starts to get overcrowded, it may be best to explore other product options.
2.Product Trends Change Quickly
Online shopping gives consumers access to an incredible number of product options. As a result, while they may be loyal to your dropship store today, they could just as easily find a product from a different store that can pique their interest tomorrow.
Take hobby items for example. A short while ago, the world could not get enough of fidget spinners and selfie sticks. Today, their demand is much lower and products like AirPods and earbuds are all the rage.
The secret here is that you need to keep up with product trends and work with suppliers that offer you access to a wide variety of products. If customers know that they can rely on you for fresh product options, they will likely remain loyal. More so if their orders have previously been fulfilled without complications.
One of the great upsides of dropshipping is that your supplier does most of the hard work. Unfortunately, this also makes you dependent on them. If they can not provide a consistent supply and quality of products or process orders efficiently, your dropshipping business could fall apart rather quickly.
Admittedly, every supplier can experience challenges from time to time, but their downtimes should not be so frequent that they become unreliable.
So, as you choose your suppliers, take time to read reviews from other customers and find out how reliable they are. Platforms like Taobao also have very informative rating systems and you can use them to gauge whether a supplier is truly worth working with or not.
To succeed at dropshipping, your customers need to receive their orders in good condition and on time. Yet, the reality of shipping is that goods can sometimes get damaged, lost, or delayed in transit.
First, it is imperative to understand what shipping methods your suppliers use and how effective they are. For illustration, while most suppliers on AliExpress even offer free shipping, their vshipping carriers can take up to a month or more to deliver. If this is the case with your supplier, then it is best to either find a different one or ask to use different shipping options.
On the other hand, some shipping mishaps are inevitable. Sometimes even when a package was properly sealed and labeled, it could still get lost or damaged. The most you can do is apologize to your customer and try and smooth the situation over. Consider offering a refund or a replacement sent via expedited shipping.
Tips on How to Make Your Dropshipping Business Successful
Before you make up your mind about dropshipping, let’s close this discussion up with some tips that could make your dropship store the next big brand.
1.Choose Your Niche Carefully
The niche you choose can often make the difference on whether your dropshipping store blossoms or withers. It is thus advisable to aim for a niche that:
- Is not saturated– use dropshipping research apps and objective market observations to find out whether there is room for your store to thrive in your chosen niche. Also, consider if you can offer anything different to outdo your competitors.
- You are interested in– it is much easier to source and sell goods that you understand and are interested in. You will likely be more driven and able to create the right product selection for your store.
- Offers good margins– fair, consistent, and rewarding margins are often way better than high but fickle profit margins.
2.Find Reliable Suppliers With Quality Products
Your suppliers are a pillar for your dropshipping store. Take time to vet them and reach an understanding about the kind of fulfillment services you are hoping for.
Additionally, it is prudent to order samples of their products before listing them in your store. This will give you a chance to evaluate the quality of the products they offer and decide if they match the quality you would like to offer your customers. Ordering and receiving your samples will also demonstrate to you the effectiveness of the supplier.
3.Work With a Dropshipping Agent
A dropshipping agent offers a variety of dropshipping services to ease and improve your dropshipping venture. For example, at Bestfulfill, our services include:
- Product sourcing– we help you find various products for your dropshipping store from reliable suppliers. This can make it easy for you to keep up with product trends more easily than when you are tied to one supplier.
- Product inspections– we verify that the quality of goods a supplier offers matches your standards.
- Branding– this entails packaging dropship orders in packaging with your logo or including promotional or ‘thank you’ slips in packages.
- Product photography– customers enjoy and prefer online stores with clear and unique images of products and we can deliver this for you.
More importantly, a dropshipping agent should be able to pack and fulfill your dropship orders on time. This can also be an ideal solution if you find a good supplier that does not offer dropship fulfillment or uses unreliable shipping carriers.
4.Market Your Dropshipping Store
The more traffic you can drive to your dropshipping store, the higher your chances of making sales. Consequently, it is essential that you generously invest in marketing your dropshipping store.
That said, the goal here is not just to spend lots of money on endless ads. Rather, spend wisely and consistently on targeted marketing so that you can reach the right audience and increase your chances of closing a sale.
While there are many advertising options you can explore, social media would be a great place to start. Recent data shows that there are over 4.4 billion active social media users. Moreover, ads on these platforms can be set to target specific demographics based on age or geographical location to attract just the right customers your way.
5.Offer Outstanding Customer Service
Sometimes the difference between a customer buying from your store or your competitor’s is the shopping experience you provide. Make an effort to:
- Promptly respond to customer queries.
- Be cordial; courteous language and pleasantries will never go out of style.
- Offer helpful advice if necessary; recommend products that can meet the customer’s needs when asked instead of simply upselling them to buy more products or expensive alternatives.
- Make amends for mishaps; offer a refund, a replacement product, or a discount coupon to smooth over any errors you may make.
In the final sum of things, there is no doubt that dropshipping is a worthy venture. All it takes is some diligent research and effort towards running your dropshipping store.
Are you worried about finding the right suppliers, quality products, or reliable order fulfillment services? We, at Bestfulfill, are well-experienced in sourcing goods from top suppliers from different platforms. We also provide comprehensive dropshipping services to ensure that your customers receive high-quality products and enjoy seamless order fulfillment.
Contact us to learn more about our services or send us your dropshipping requirements and request a free quote.
FAQS About Dropshipping
1.What Are the Biggest Risks in Dropshipping?
Unreliable dropshipping suppliers. If they can not hold up their end of the bargain, then your customers will often end up disappointed.
On the upside, working with a dropshipping agent could eliminate this risk because they would be more dedicated to the needs of your business, unlike a supplier that caters to a multitude of clients.
2.Is Dropshipping Profitable?
Yes, it is.
You only need to find the right niche (as explained above). Make an effort to equally source goods from platforms, like Taobao or AliExpress, that offer wholesale prices that remain affordable to customers even after you add your mark-up.