Dropshipping used to be such a buzzword. It was known for rehabilitating couch potatoes into full-blown millionaires. Now, it’s as good as dead but… not really.
For this blog to actually make sense, let’s rewind and first define what in fuck’s sake dropshipping is. Dropshipping is a business model that lets entrepreneurs start an online store and sell products without a single item in stock. They buy the products from a supplying third party which ships directly to the ordering customer.
Sounds like good business, eh? So why is dropshipping dead to people in 2021?
Sit tight and buckle up ‘cause we’re about to go on a roller coaster ride of data and case studies from the pros. Be sure to stick around to get acquainted with the business of dropshipping.
Why people think dropshipping is dead
People of different stripes argue that dropshipping is dead because of its highly saturated market, low profit margins, uncontrollable supply chain, and entanglements with the law.
Before I even begin to dispute anything, I have to admit that these are good points.
Dropshipping has a low cost of entry—anyone can start a dropshipping business from the comforts of their homes with 0 stock inventory. This means more competition, and more competition means more supply. When there are too many people selling the same damn things in the same damn way, people get sick of it. Demand dwindles and sales decrease. It’s a classic supply and demand situation.
The global market size was also projected to rise from USD 122.3B in 2019 to USD149.4B in late 2020. Now that we’re in 2021 and everyone suddenly wants to be a digital entrepreneur, some believe that the market is getting even more saturated than it already is.
And while entry cost is low, the cost of goods is high. You’re not the supplier—you’re the middleman looking to earn money from being their little secretary. You take the frontlines, market their goods, manage orders, handle customers, and do a bunch of other shit.
For what? Most of the money you earn goes back to the supplier. What you actually earn is just shaved off the top of their winnings. Congratulations—you get crushed ice, or a cherry on top if you’re lucky! What good does that do? We want fucking ice cream.
Another thing about dropshipping is you’ve got 0 control over supply chain and logistics. It’s convenient in a way. However, in cases when customers complain about product quality, arrival time, return policies, and the likes – you can’t do shit but play doting customer service representative… to save the ass of your supplier.
Don’t forget the legal liability problems. There’re actually no laws that make dropshipping illegal, but the laws around it vary per country. If you don’t keep tabs on what the hell is going on in local politics, the business of dropshipping is risky business. I’ll go deeper into this topic on another blog post, so stay tuned for that.
But here’s the deal. These arguments have a shared fatal flaw.
They use a sketchy formula where disadvantages + challenges = death of a business.
If anything, this ‘death’ is an educated guess. Businesses may die down eventually as tech evolves, but there’s no way of telling when, or if. Businesses also adapt to the times.
The death of dropshipping is a theory. It’s not ludicrous like the flat earth theory but hey, still a theory. As much as it’s rooted on data, it’s one that’s been floating around year by year like a buzz killer that doesn’t work. Funny enough, there’re also data that hint at the rise of dropshipping.
Why people think dropshipping is NOT dead
Welcome to the other side of the coin. Tons o’ people and organizations are confident that dropshipping is still king due to rising internet penetration, increased buying power in developing areas, growing mobile phone usage, and emerging niches.
According to Statista, almost 50% of people in developing regions now have Internet access – this is a huge jump from 35% in 2015. This basically means dropshippers have more potential customers to sell to. Competition grows, but market size also does.
More good shit: Compounded retail sales in growing markets in India, South Africa, Turkey, etc are estimated to reach 3.5T USD every year, based on Credit Suisse Research Institute. Dropshipping is already saturated in the USA, but not in these newly emerging markets.
Let’s crunch more numbers. Ecommerce sales made through mobile phones are poised to reach 54% by 2021, another huge jump from 2017’s 34.5%. Since 2017, more and more people are also looking for niche items like handmade presents, vintage wear, home décor, the likes.
Still, a whole lot of folks think dropshipping is dead. And a whole lot more people can’t make up their mind so they look it up on Google. You’re probably looking into starting a dropshipping business if you’re reading this blog post. This is why I’m writing this, so that you get familiar with the two sides of the same coin.
Not convinced yet? Here is what experts are saying, along with case studies to prove that dropshipping is alive and kicking. I’ll also be adding my two cents along with actionable, no-bullshit advice.
”The drop-shipping market isn’t saturated — new markets continue to appear.”– Kamil Sattar
Earlier, I talked about how the dropshipping market is highly saturated due to low entry cost and growing competition.
Sattar argues in a Forbes article that the market isn’t actually saturated. New markets keep popping up like whack-a-moles. Yes. Markets, plural. The dropshipping market is not just one whole pie that dropshipping stores fight over. This pie is actually made up of hundreds if not thousands of smaller pies or niches.
Different pies have different levels of supply and demand. Some pies sell out like crazy, while some pies don’t sell as much. Where am I going with this whole pie metaphor?
I’m (and Sattar) is saying that successful dropshipping entrepreneurs:
- Look at supply and demand closely (a.k.a. supply and demand analysis)
- Study what a specific market wants or needs (market research, basically)
- Checks what competitors are doing to serve that market (translation: competitor analysis)
By doing this, they come up with a unique selling proposition or USP that sets them apart from the long list of dropshipping businesses AND adds value to the market.
In dropshipping, you have zero control over stuff like supply chain and product design, BUT, and that’s a big BUT, you have full control over what products you source and where, as well as the quality of marketing and branding. Focus on the shit you can control. Sell high-quality goods and use marketing & advertising strategies that actually sell.
“Common drop-shippers focus on selling low-quality products with low-quality marketing. They might try to set up stores quickly, running five-dollar ads in hopes of becoming millionaires.”– Kamil Sattar
Sattar killed the ‘is dropshipping dead?’ debate right here. Dropshipping is not dead. People just think it’s dead because it doesn’t rack up millions as quickly as they thought it would. It’s not a get-rich-quick scheme.
Dropshippers who win the game invest in kickass marketing, advertising, and branding strategies to stand out, connect with their market, and sell consistently.
For example, I know a dropshipper that use storytelling to strengthen marketing efforts. She may be selling the same product as other dropshippers, but marketing their sourced product as part of a small, humble local business started by a broke fresh grad attracts loyal customers.
There are also entrepreneurs that position their products as luxury items with fancy branding and a liberal budget on advertising. This adds prestige to their products, which helps them sell at higher prices.
“You can persuade a customer to buy more of a product by offering discounts for each extra purchase on your online store.” – Ben Shaffer
In his Medium article, Shaffer outlined how he got more moolah even though dropshipping has a rep for having low profit margins. The article was published 2018 but the case study is still relevant today.
It’s a tactic that never gets old: people get weak in the knees over discounts and bundle prices.
I once bought around 8+ products from the same dropshipper because they offered a discount if I got X number of products. I, like any other average person, am a sucker for paying less and getting more than what I thought I’d get. This is why this strategy works so well, even all the way up to 2021.
So back to Shaffer. He was selling an item for 30 USD, which cost him around 10 USD from the supplier. He stacked a shipping fee of 4.95 USD on this so overall, he earned 25 USD for every order. Even better, he added around 25% more to every order by selling related products. Big emphasis on ‘related’.
I wouldn’t buy, say, fucking chia seeds along with an airconditioner. Instead, sell pants to someone ordering a shirt. Fries to someone buying a burger. New and improved stereos to someone getting a flat-screen TV. You get the drill.
“What this meant is that I could spend more money on advertising and still make a profit. And this is more or less how a business scales with eCommerce and especially with drop shipping,” Shaffer went on to say. So there you have it.
You can also sell more and earn more with other tactics, according to Shaffer. I’m compiling them all here:
- Sell a better version of the product to an existing customer (upselling)
- Sell a related product to a buying customer (cross-selling)
- Offer discounts for bulk purchases
And that is how you fight against the ‘is dropshipping dead?’ talk.
Is dropshipping dead? Obviously not.
But that was a long read, so here’s a refresher on the pros and cons– again, two sides of the same coin.
|Why people think dropshipping is dead||Why people think dropshipping is not dead|
|Highly saturated market||Rising internet penetration|
|Low profit margins||Increased buying power in developing areas|
|Uncontrollable supply chain||More mobile phone usage|
|Entanglements with the law||Emerging markets and niches|
Kamil Sattar, the leading industry expert of dropshipping, also said the market for dropshipping isn’t actually saturated due to new markets. We learn from him that making it big in the industry means moving like an entrepreneur, and not like a couch potato hoping to magically get millions of dollars. That means investing in smart marketing, advertising, and branding strategies.
Ben Shaffer, another successful dropshipping entrepreneur, gave tips and a case study on how he transformed the low profit margins of dropshipping into solid, consistent, scalable wins. We learn from him that offering discounts and bulk prices, upselling, cross-selling, and other similar tactics help him invest in enough ads to keep the income flowing while still getting awesome profit.
As you can see, dropshipping is not dead, nor is it a husk of its formerly glorious self. It just has its pros and cons like every other business model out there. Like most things, you have to haul your ass hard to earn the bucks, too.
I hope I managed to impart some wisdom to you, reader.
Want any more blog posts on dropshipping? Let me know! This is my first one and I have another on its legalities coming up soon. Aside from that, I’d love to hear topics you want to read about. Sounds off in the comments!
PS. If you want to see more ‘is [insert whatever thing here] dead?’ blog posts, check out this one on blogging. Here, I talk about how blogging, like dropshipping, is far from dead. I also dug into case studies from blogging experts.
- On content strategy and top quality blogs: Julia McCoy of Express Writers
- On authority status and niching down: Alex Nerney and Lauren McManus of Create and Go
- On networking and guest posting: Tom Hunt of Virtual Valley