If you're looking into starting an eCommerce business, you'll no doubt have come across the term dropshipping and numerous people asking, "Is dropshipping dead?"
Once you've read about what is drop shipping, how to dropship, and understand how dropshipping works, you'll want to make sure there's a future with the industry.
Keep reading to learn about the current state of dropshipping, see some useful statistics, and read an overview of the dropshipping market.
Is Dropshipping Dead?
No, dropshipping is not dead, it's actually growing faster than ever! Due to the low barrier to entry, minimal startup costs, and large market, dropshipping websites continue to be a major force in eCommerce growth. More people than ever are looking into how to start a dropshipping business.
The dropshipping industry is still experiencing strong growth opportunities, however, the somewhat dubious strategies employed by many dropshippers in the late 2010s to make quick profits are dying. Instead, there is a major shift toward sourcing high-quality products. Instead of seeking out cheaper products to move in bulk, dropshippers use a wholesale directory of businesses with a wholesale license, or wholesale marketplace to know how to find vendors and buy well-made wholesale items to sell. Only through using this model can you answer the question, is dropshipping profitable, with a definitive yes.
Since dropshipping is such a fast-growing sector of the eCommerce industry, we've compiled some important statistics for you.
Here are some of the most interesting dropshipping statistics:
- About 30% of eCommerce businesses have adopted dropshipping. This is common across all types of eCommerce businesses, whether a B2B business or direct to consumer.
- Dropshipping market size was over $100 million in 2020. The market also continues to see year-over-year growth in line with the general 17% growth of the eCommerce industry.
- 33% of shoppers compare prices online before making a purchase in person. This means dropshippers can increase eCommerce sales by undercutting brick-and-mortar stores on pricing as they have little to no inventory carrying cost or warehousing costs. low overhead expenses.
- More than 35% of Amazon sales were fulfilled by dropshippers. Many dropshippers use an online marketplace like Amazon to keep costs low and maximize their reach. Just know that there are a few differences between Amazon FBA vs dropshipping. That's one of the reasons so many food suppliers are turning to BlueCart eCommerce. Our all-in-one marketplace handles all the heavy lifting to get your storefront up and running, so you can sell DTC, B2B, or both in no time.
- Manufacturers that participate in dropshipping are ~18% more profitable than those that don't. This shows that dropshipping is a valuable channel for existing suppliers to expand into to increase revenue.
- Dropshippers can be 50% more profitable than traditional retailers. This relies heavily on their markup (see markup vs margin) and how competitive the space is.
- More than 80% of dropshippers say finding a good supplier is the biggest obstacle. This means the hard work comes first, so you can focus on selling and maximizing your dropshipping profit margin once you have a good deal in place. This is key in how to make money dropshipping.
- A majority of failed dropshipping businesses relied on cheap products. Customers expect quality, so dropshippers just looking to make a quick buck aren't tolerated anymore. This is one of the most common dropshipping beginner mistakes.
Is The Dropshipping Market Saturated?
The dropshipping market isn't saturated, even with the strong YoY growth in new businesses. This is because there are many dropshipping niches left unserved or with little competition.
Here are some tips on finding an unsaturated niche:
Look for Demand
Customers know what they want, and they're often very vocal about it. Look to social media and do some eCommerce keyword research to see if there's an area that is currently seeing a surge in demand. You can use these trends to find your niche, or participate in drop surfing or reverse dropshipping to maximize profits and shift product offerings to match customers' shifting wants. This will also help you for demand planning in the future or for creating and updating your drop shipping business plan.
Determine Market Size
Picking a very broad market will likely lead to a saturated and competitive atmosphere. Instead, look for small to mid-sized markets that offer more room for growth. For example, if you're interested in selling baked goods online, you could further narrow your focus to only selling cookies online. Finally, you could choose to sell gluten-free or vegan cookies. Or only use local ingredients. Find a way to differentiate your business and narrow your market to a sustainable number.
Try a Test Run
One of the easiest ways to see if a market is sustainable is to begin selling in it. To avoid overextending, select just a few of the best dropshipping products for a given market and use eCommerce marketing to get the word out. Establish goals for your eCommerce metrics and evaluate the results after a given period of time. If the results are promising, invest more. If not, keep looking for your niche and try again. You need to know how to find dropshipping suppliers that are reliable and have a broad product offering.
Perform Competitor Research
Most niches have some existing businesses in them. Luckily, their successes are paired with failings. Look at their growth, customer service for dropshipping activities, and even their eCommerce PPC and dropshipping ads for dropshipping business ideas. You can avoid the pitfalls they made and discover areas where they're still weak. This will give you the perfect way to jump into the fray and start taking market share. You can even invest in automated dropshipping software to perform this research for you.
Don't Drop Dead!
The dropshipping market is far from dead, but is seeing a shift toward a more sustainable model. By procuring reliable suppliers of high-quality goods, you can grow your own successful dropshipping business and prove wrong anyone who asks "is dropshipping legal"? You should also invest in a quality dropshipping website builder to ensure your site is easy-to-use and functional and fill some dropshipping jobs with people who can help your business grow even faster.
For more information, check out our free drop shipping for dummies guide or try reading dropshipping books and taking dropshipping courses. You could also look into cross docking if you have a little bit of storage space and want more quality control.