When you buy products online, have you ever wondered if they are sold to you directly by the manufacturer or the supplier or from any other source? There are chances that of the many things bought online some may have been from a dropshipping website. What is a dropshipping business? Let’s explore more on it and know if the dropshipping model of business is still profitable in 2022.
What is dropshipping in the e-commerce business?
Dropshipping is a popular e-commerce order fulfillment business where the online business owners (called dropshippers) simply take purchase orders from customers and pass them on to the suppliers, manufacturers, or retailers who then directly ship the goods to the customers.
The benefit of this business model is that the dropshippers do not have to manage the inventory, stock the products, or manage the logistics. Their task is to market the products and get maximum sales so that they enjoy a profit margin for the products they sell.
How did the concept of dropshipping start?
In the early 2000s, business owners would source items from suppliers and manufacturers and sell them online on Amazon and eBay. These e-commerce platforms charged a fee but it gave businesses the benefit of getting in front of over 300 million users with high purchase intent. Then came AliExpress which sold thousands of products online. But the language was a barrier and it could barely sell to people in the US or Europe. Here is where dropshipping helped. Business owners placed products of AliExpress on their website and transferred the purchase order to Chinese manufacturers and suppliers on AliExpress. It was a win-win situation for dropshippers, customers, as well as suppliers.
Now, you may ask, why can’t suppliers or manufacturers sell their products online than rely on dropshippers? Is dropshipping profitable to retailers and suppliers too? Yes, without any doubt! In fact, suppliers earn around 20% more profit if they sell to dropshippers compared to making their own sales from their online stores. The benefit for suppliers is that they do not have to spend on marketing as long as they are selling products. And selling to customers in other countries is not easy. So, a supplier in China can arrange for a dropshipper in America and Europe without having to worry about acquiring customers there. And a dropshipper has to just market the products in the US and Europe without having to worry about product manufacturing, stocking, or shipping. It is profitable for manufacturers too since they can make better profits by selling directly to dropshippers instead of wholesalers. Ultimately, a supplier or manufacturer is more bothered about selling products and making profits and a dropshipper fits into the scheme perfectly.
As per a survey by Statista, the number of dropshipped products in America for the year 2021 stood at around 1.8 million (Shopify, Oberlo, and Spocket combined) while it was 5 lakh products in Europe. It is projected to be a $600 billion industry by 2027.
With the rise of e-commerce building platforms such as Shopify and WooCommerce, the business of dropshipping has become easier. These platforms provide business owners with dropshipping apps or plugins that automatically send the customer orders placed on the website to the dropshipping supplier.
What are the benefits of dropshipping business in e-commerce?
Easy to start
The biggest benefit of dropshipping is that it is easy to launch with just an e-commerce store and no capital required in inventory or manufacturing. It is a low-risk business model where you buy a product from the supplier only when the customer has placed the order on your website.
Easy to scale
It is easy to start a dropshipping business and easier to scale it up. You don’t have to deal with managing a warehouse, packing and shipping orders, or managing stock level. All that is required is a laptop and internet to manage the business. Even if you receive double the orders, its processing is handled by the suppliers. Your additional work will be related to customer support and this task is easier than traditional e-commerce business.
In dropshipping business, you basically market the products, keep track of the orders received and pass it on to the supplier. You can run your business from anywhere with an internet connection. As long as you communicate with the suppliers and customers, you can easily manage the business with no geographical restrictions.
Wide selection of products to sell
There is no limit to the items to sell in dropshipping. You can offer an array of products that are trending and list them for sale on your online store at no additional cost.
How to make a successful dropshipping business?
1. Pick a trend and niche
The rule to succeed in dropshipping is to pick a niche store and trending products. For instance, gadgets and electronics are trending and you can prefer to pick a niche segment such as mobile devices. Today’s generation prefers gadgets and you can create a large customer base for selling mobile phones. Similarly, when you target the kids’ segment, you can select to dropship toys. The idea is to pick products that appeal to the masses. But one thing to remember here is that even if such niches are lucrative, they are highly competitive too.
Here’s a look into the popular dropshipping niches for AliDropship.
Remove friction in understanding the app usage
Tell users about new features updated in the app
Provide quick access to important features within the app
Show users how to get more value by using the app features
From the chart, it is evident that fashion accessories and gadgets are the highest preferred niches for dropshippers followed by baby products and clothing. It also depends on whom your target audience is and how you intend to sell it to them.
2. Build good relationships with suppliers
It is not just the customers but even suppliers are also crucial to running a successful dropshipping business. Most of the dropship suppliers are located on foreign shores, so partner with the right supplier. Communication is important and if your supplier is not able to understand your requirements, there is no way that you can offer good service to customers. So, it is important to identify potential manufacturers and suppliers at the outset who have the ability to scale with you.
3. Build a good website and a mobile app
Every dropshipping business needs a website and a mobile app. Do not be under the impression that an Instagram or Facebook account is enough. Platforms such as Shopify and WooCommerce offer simple and fast ways to build an e-commerce website. They also provide Oberlo and Spocket integrations to help you find products to sell and auto-update stock levels and prices in real-time. You can find dropshipping suppliers from SaleHoo, Oberlo, Spocket, AliExpress, Worldwide Brands, and Megagoods.
The benefit of a Shopify or WooCommerce website is that you can easily create a mobile app from it using Swipecart. It saves you time and resources otherwise needed to build a mobile app from scratch. Now, with a mobile app, you can increase your marketing potential through personalized push notifications.
4. Dropshipping promotions &a marketing
Promoting your store and marketing your products should be at the top of your list to make a success out of your dropshipping business. Join online communities and social media groups where your niche market interacts. Facebook, Pinterest, and Instagram are the most popular platforms to discover new customers through interaction. Share creative content and invest in online paid advertising with a careful long-term strategy. Marketing is the soul of dropshipping and if your strategy is right you can keep attracting customers for your store long-term.
5. Invest time, money, and energy
Many people fail in dropshipping because they think it is easy to make money. Most of the dropshipping websites lack quality. They simply copy-paste the product image and descriptions from the supplier website. In fact, many of the dropshipping websites don’t even have a product description.
Improve the quality of images and descriptions. Think from a customer’s perspective. What do they expect from the product? Write the product description to make it user-friendly as well as SEO-friendly. Edit the images and make them appealing. Don’t give a chance for your website visitors to reverse engineer the product photo and find out from where you have lifted it. If they find out that the original website sells it for a lesser rate, they will not come back to you. Be unique and creative in displaying the products on your website. Dropshipping is a real business. It is not just setting up a website and selling random stuff online. You have to invest your time and energy.
6. Prioritize customer service
The rise of social proof has made it easy for dropshipping businesses to acquire customers. But, on the contrary, if your customer service is pathetic, the whole world will know it courtesy of social media. So be careful to treat customers with care. One of the biggest disadvantages of dropshipping is fulfillment issues. Since you are dependent on the supplier for shipping and returns, satisfying the customer here is challenging. You could lose money occasionally and this might be necessary to keep customers happy. Make customer service a priority. They are likely to spread word about your store and keep getting you new customers.
So, is dropshipping still profitable in 2022?
Dropshipping is still profitable in 2022. There are no two ways about it. People prefer this business model because there is a low-risk involved to build a sustainable income. The myth people have about dropshipping business is that you can become successful overnight. While it is true that some have indeed tasted success overnight, it is a long path for the rest. It can take anywhere between six months to a year for your dropshipping business to become successful.
And more importantly, start looking at what your customers want instead of looking at profits. Build a brand first to get repeat customers. The potential in dropshipping is unlimited in 2022 and beyond. Go for it!