Is Dropshipping Worth it & Profitable? Answers with Data.

Dropshipping is an online business model that does not require you to maintain a stock of goods or even manage the logistics.

You essentially become the middle-man between a manufacturer or wholesaler and a retailer or customer.

The process is simple. You set up an e-commerce store and decide which products to sell. 

When a customer is interested in one of your products, they will place an order with you. You source the goods from a third-party supplier who ships them directly to the customer.

Once the order is fulfilled, you earn a commission on the sale.

Dropshipping started decades ago and flourished with the rise of the internet. But is dropshipping worth it for the years to come?

Is Dropshipping Dead?

So anybody with access to these tools is a potential competitor.

Another reason could be the increased costs of marketing the business.

The majority of your income from a dropshipping business is dependent on how well you market the business and how many new customers you reach. 

While you can do this organically with free social media promotions, you will often have to run paid campaigns on Google, Facebook, or Instagram.

This additional cost may hold people back from starting the business.

However, all these and other factors can be dealt with if you’re willing to put in the time and effort needed to run a successful business.

The numbers

Accordingly to a study by Globe News Wire, the volume of the global dropshipping market size was evaluated at 162.44 billion dollars in the year 2019 and is predicted to touch 591.77 billion dollars by the year 2027, it is envisioned to increase at a CAGR of about 18.3% from 2020 to 2027.

Billions of people globally will do shopping on eCommerce platforms in the most coming future. Meaning, supply and demand over different markets will stay stable.

There are over 2,14 billion online customers globally in 2021

Another best way to know if dropshipping is still popular is to run a search on Google Trends. 

You can find out how popular the term “dropshipping” has been over the 12 months or can even go up to the last 5 years. 

An option also allows you to see the growth in the popularity of this term ever since 2004.

You can see how much people have searched for the term dropshipping in the US over the last five years here and since 2014. 

In the charts, you can see that the term ‘dropshipping’ mostly has an upward trend.

It means that there were times when people weren’t searching for it so much, but still, the number of searches has always been increasing year on year.

Other Data:

• Between 22 and 33% of online retailers have presently embraced the dropshipping model.
• Approximately 50% of online sales on Amazon are from third-party merchants adopting retail models similar to dropshipping.
• Shopify’s revenue for the 12 months concluding March 31, 2021 was $3.44 billion (a 99.58% rise year-over-year).

Is dropshipping worth it?

Now you know that dropshipping is not dead and that more and more people have been trying to get into the market.

So you might be wondering, ‘is dropshipping still profitable?’ or ‘is it worth my time?’

The simple answer to both questions is yes. It is definitely worth your time and is also very profitable if done right.

Please remember, though, that dropshipping is not a get-rich-quick scheme. It takes time and honest efforts.

You can certainly launch the business in minutes using marketplaces like Shopify or Amazon, but don’t expect it to earn you thousands of dollars overnight.

Whether you start it as a side-hustle or a full-time business, it will always require hard work like every other business.

The dropshipping model certainly has advantages in the initial stages, but it also comes with a default set of complications that you will have to handle.

The complications can be in terms of the supply chain, customer support, quality issues, and low profits. Let’s understand these aspects a little better:

Supply chain – you may run into shipping and delivery issues, especially if you source from multiple suppliers.

One solution to that could be starting out with a single supplier and adding more as you start figuring out the system.

Customer support – while not having to maintain stock and manage inventory is a perk of dropshipping, you must be ready to apologize to customers when your supplier fails to deliver.

A simple solution could be using your e-commerce platform’s customer service, but it can be expensive if it’s not built into your pricing.

Quality issues – since you don’t have much control over the supply chain, you can’t always be sure of where your products are coming from.

While most suppliers won’t defraud you, there are always some who don’t play fair and supply cheap knock-offs.

Low profits – the truth about dropshipping that most people won’t tell you is that you won’t always make $100 dollars on every sale.

You can do that only when you sell big-ticket items that are priced beyond $1000 retail.

Is dropshipping profitable?

Yes. Dropshipping can be profitable if done right . Dropshipping is a low-risk business approach that enables you to sell goods to your clients without acquiring big operating costs like a wholesaler would acquire. Therfore, it is more apparent to grow profitable through dropshipping a lot quicker than other different business types.

So if the profits are so low, can you still make a living with a dropshipping business? Yes, you can – if you do it right.

To make a successful living out of your dropshipping business, you can keep in mind these 3 things:

Do your research

Never enter a business without doing proper market research and finding a profitable niche. Even with so many players in the market, you can find a profitable niche in your market if you do your research.

Choose the right market 

Catering to markets where warehousing costs are generally high can be the right move for in-demand products.

If the warehousing costs are too high, it’s likely that there aren’t too many local sellers keeping their stock in that region. Dropshipping can be the perfect solution to this.

Experiment the products

If a product doesn’t do too well in your target market, don’t be afraid to switch things up and start selling something else.You can even sell a mix of products to match market demand instead of focusing on a single product.

The average drop shipping income you can make per month depends on your niche and business setup.

If your marketing is extensive and you have a loyal customer base, you can earn higher profits by selling at higher rates.

If you don’t invest much in marketing and have to sell at low prices, your margins will be considerably less.

On average, your dropshipping profit margin varies between 10% and 40% per item. So you can make anywhere between $1000 and $50,000 per month, depending on what you sell and how high it’s priced.

The difference between profitability and turnover

This is why many coaches speak only in revenue and not profitability.

Yet it is profitability that matters. You take your turnover and deducte all the expenses from your business ( membership fees but also the purchase price of products and advertising ). 

Also take away your wages and all that follows to get your bottom line.

On $ 100,000 in dropshipping revenue, if you don't optimize your business and your margins, you can lose. You may only get $ 5,000 at the end of it after you put some money aside for future expenses. 

Profitability will also depend on your legal business status. You can be a sole proprietorship, a company such as , or a micro enterprise ...

You can opt for the payment in discharge of the tax, be exempt from basic VAT . Make it clear that you are doing a buy-resale activity on the internet as your main activity.

Related: How Much Do Dropshippers Make This Year. 

Dropshipping best practices

How successful you are at making a living with this business depends entirely on the time and efforts you invest in it, and your ability to handle complications.

Follow these business best practices to increase your dropshipping success rate:

1) Do Enough Product Research

Businesses that perform research properly grow two times faster. These research-driven companies are also successful compared to businesses that neglect research.

Before you decide what to sell, run thorough product research. 

Find out how much in demand the product is, what are the highest and lowest price points for it, and the risks involved.

For example, you decide to start selling television sets because they’re sold at high prices and you can earn higher commissions. Great!

But is there a demand for TVs in your operating region or do people prefer watching all their content on smartphones?

What is the lowest price you can offer to your customers? How high can you go once you establish your presence in the market?

Since it’s an electronic item and is also fragile, what are the risks involved? Are you looking at extensive damages in shipping or dead parts or extremely long delivery times?

Understanding all these aspects will help you decide if selling TVs can be profitable.

You might even end up selling smartphones if you find out that they are more in demand in your region!

2) Test Your Product 

It’s crucial to understand the product you’re selling in your store.

Have you ever liked a product from an ad you saw, ordered it online, and ended up receiving something you had no use for? 

You know how frustrating it can be!

So, when you decide to start selling something, it’s your duty towards your customers to know your product inside and out.

You must be able to provide exact and complete product descriptions based on your own use rather than displaying a generic label the supplier sends.

Additionally, when you test your product with samples, you can create helpful how-to and promotional content for your marketing activities.

You can also answer your customer’s questions effectively because you have used the product and know-how to troubleshoot it.

3) Automate Your Marketing

You will have to spend a lot of time and effort on promoting your business, especially if you don’t already have a strong social media presence.

To help you focus on the core business, you can automate all your marketing activities.

While this will significantly increase your setup costs, it will prove to be invaluable in bringing business.

Relying only on marketing efforts that you can spare time for, such as uploading social media posts and writing content for your websites will slow down your progress.

And organic traffic is much less in volume compared to the traffic you can get from paid marketing campaigns. So why not invest in marketing tools that make your job easier while increasing your sales?

You can automate virtually all your marketing activities including social media ads, e-mail marketing, and sales funnels.

All you will have to focus on then is responding to customer queries on your social media platforms and e-mails.

4) Choose your suppliers carefully

Since dropshipping is so popular, there are many suppliers in the market that may be fake or looking to defraud you.

You must select authentic suppliers and consider various factors when finalizing one.

An authentic supplier will never charge you any money to access their monthly catalogs or be the people selling at wholesale rates to end consumers.

The simplest way to build relationships with authentic suppliers is to contact them directly and inform them that you have a dropshipping business.

Another convenient way to find authentic suppliers is to attend trade shows. Fake suppliers are unlikely to attend trade shows since they usually require a heavy investment.

Once you have shortlisted the best suppliers for your product, you must consider factors such as pricing, delivery times, return policies, and packaging options before you finalize one supplier.

You should also consider how active the customer support is, if they offer any customization options or discounts on large quantities and if they charge dropshipping or other fees.

5) Offer Excellent Customer Service

 it’s essential for every business to offer exceptional customer support to thrive in a highly competitive market.

You can create a series of FAQs and troubleshooting articles to help customers on the go, but they may still require help.

For this, create a helpdesk function and ensure that all calls, e-mails, and messages are always answered. Nothing pushes customers away like bad customer service.

To ensure that you can provide effective customer service, remember that one person cannot do it all.

It’s best to have a dedicated customer support team and platform that allows you to have multiple e-mail inboxes and phone or messaging lines for different customer queries. If you see your business grows, you may use CRM softwares.

You may not be able to do this initially, so you can choose a helpdesk solution such as ZenDesk or HelpCenter to help you manage customer care a little better.

6) Monitor Your Competition

Keep an eye on the products your competitors sell. Follow them on social media to understand how they market themselves.

Visit their websites to know if they run e-mail campaigns or sales funnels. 

You could even subscribe to a couple of them to get an idea of the kind of content that works in your chosen niche.

Since these people have been in the same business longer than you, they have probably experimented with a lot of things.

You can take advantage of their research and development and model your marketing strategies based on theirs.

You should not copy them exactly, but you can understand which content interests your target audience and which content drives sales in your niche.

You can even take ideas from their social media and e-mail campaigns to design unique campaigns for your products.

Additionally, by monitoring your competition, you will also stay updated on the latest industry trends and best practices. You may use spy tools like Adplexity.

You can use this information to spruce up your product mix and drive better marketing campaigns. And becoming a better marketer directly boosts your sales and establishes you as a strong player in the market!

7) Use only relevant apps/tools

You might be tempted to use a plethora of tools and apps for your e-commerce store or marketing campaigns.

However, it’s a good idea to only stick to those services that you truly require and avoid cluttering your space.

Ideally, you would need platforms for marketing, customer support, and the most important – an e-commerce partner.

Adding anything more before you need it only increases your cost and does not guarantee more profit.

Related : Top 42 Dropshipping Tools You Should Consider Using

Keep your website clean and simple, too. Using too many pages or tools will only confuse users and probably take their business to a competitor.

So, choose one social media platform for marketing when you start out and add e-mail marketing to the mix once you have enough followers to build a mailing list.

Use one service for your helpdesk, and choose only one e-commerce partner such as Shopify. Most of these platforms offer in-built functions to integrate multiple functions, so you don’t need anything else.

8) Advertise Wisely

It may also be tempting to run a ton of ads right from the get-go. But it’s important to start small, analyze the impact of your campaigns, and adjust them to reduce costs and maximize profits.

You can run ads on Facebook, Instagram, or Google. But not all those campaigns will give you results.

So, it’s important to perform testing and analysis on each campaign to determine which one brings in the most revenue and which ones can be dumped.

Another effective method to promote your website is to optimize all your content for SEO.

Customers usually open the websites that show up at the top of their search results. So if your website is optimized for SEO, your sales will increase organically and add to your marketing efforts.

Consider all these factors before spending too much on advertising to maximize your profits.

Conclusion

It may seem like the market is saturated and you may wonder if starting a dropshipping business is worth it or not.

The competition is very high in the dropshipping industry but if you do it right, you can still earn money from it.

The market is not dead or saturated, it’s just highly competitive like any other business. You must treat it as a business and not a get-rich-quick scheme, and put in strong efforts and time.

Follow the best practices and tips given above to run a successful dropshipping business and earn a solid income from it.

Further Reading: 

• Top 42 Dropshipping Tools You Should Consider Using
• How To Start A Shopify Store In 15 Minutes With Easy Steps
• 22 Best Facebook Ads Spy Tools For Higher ROI
• 50+ Best Business Ideas That Make Money This Year 
• The Best Shopify Themes For Dropshipping To Make A Sale
• The 22 Best Shopping Cart Software You Can Try Today 
• Recommended Apps : Shopify and Alidropship