eCommerce has been steadily growing and shape-shifting in recent years, accounting for 16.1% of the worldwide retail sales. And the dropshipping industry is projected to reach a market valuation of a whopping $557.9 billion before 2025. And yet, some people have claimed dropshipping - an eCommerce business model created in 2006 - to be outdated. And so the question has to be asked: Is dropshipping dead?
Why Is Dropshipping Considered Dead?
To answer this, we have to look first and foremost at why there’s such a statement. Here are 3 reasons why the case might be so.
It’s Easy To Enter The Market
Dropshipping requires next to zero capital to start since you’re essentially acting as the middleman for every delivery from a manufacturer to a consumer. You can make a marginal profit on every transaction and don’t have to spend a single penny on storage and packaging.
And due to the ease of entrance, anyone with a Wifi connection is a potential competitor. As of July 2020, around 27% of online retailers have adopted dropshipping, thanks to the fact that dropshippers potentially earn more than 50% profit than businesses who keep their stock inventory. The experienced dropshippers have filled all the niches you can think of. And thanks to the pandemic, demand for online buying is only going to increase, hence the number of dropshippers.
Source: ecommerce platforms
In other words, you have a slim chance of surviving the dropshipping market if you’re planning on joining. It’s hard to compete against veteran dropshippers who offer more shipping options, who attract up to 66% of online shoppers.
Increased Advertising Costs On Facebook And Google
Since you are the middleman, you really have to play the marketing game right. A dropshipper has to market their online store well enough to gain leads and convert them to customers. But as more competition spreads around on different platforms, those platforms will realize the situation and take advantage of it. Thus, Facebook and Google have in turn increased the ad cost, and trust me when I say it’s going to keep going up (of course, that is when the pandemic stops hindering businesses).
The Trade War With China
Now, don’t worry, we’re not going to get political here. It’s just that there are now tariffs that make goods imported from China much more expensive. So if you’re dropshipping or planning to dropship from China, you might want to do some research and find some loopholes.
But if you’re dropshipping domestically or from other countries, there’s absolutely nothing to worry about.
So, Is Dropshipping Dead? Really Dead?
The short answer is no.
All the statistics you can find on the Internet point to the fact that the market is saturated and competitive, but that doesn’t mean dropshipping is dead. In fact, it’s more alive than ever. How else do you think the dropshipping market is expected to register a CAGR of 28.8% from 2019 to 2025? So here’s the part where we will debunk the misconceptions leading to the question “Is dropshipping dead?”.
Countless competitors Don’t Mean The End Of The World
Since dropshipping has been around since 2006, it’s usually understood that the market has existed so long that there’s no space for new businesses. People think that dropshippers have taken over all the niches that one can sell in.
Sure, the amount of competition you’re facing is enormous, but that’s not the endgame. You can always find new suppliers and new brands to work with and sell the best and newest products that come out. Consumers’ taste changes all the time. Something can be trendy for 2 months then become completely forgotten about, like fidget spinners. As long as you can stay up to date, you can be on top of the game.
Just because a company has been around for a long time doesn’t mean they’re going bankrupt any time soon. Look at Apple, do they look like they’re giving up? No! Keep innovating and searching, and don’t hesitate to expand your product lists.
Ad Costs Increasing Is Inevitable
Since it’s something you can’t avoid, you might as well learn how to cope with it. In a saturated market with millions of competitors, those with effective marketing campaigns will stand out.
Common dropshippers hear stories about how dropshipping can turn anyone into a millionaire in just 90 days and they daydream about making money quickly. Well, eCommerce is not a Ponzi scheme, so expect hardship. Don’t sell low-quality products with low-quality marketing. Successful dropshippers take notice of the supply and demand and how they can add value to the market.
And nowadays, there are a plethora of online tools to help your dropshipping business. Platforms like Shopify or BigCommerce offer you numerous marketing tools that are specialized in converting or gaining leads. 1 dropshipper might be way ahead in the race compared to someone selling the same product, just because he’s well prepared and using tools to leverage his sales.
Business Is Always Political
Trade war and even military war are such a norm in the world right now, although they shouldn’t. But that’s just the reality we’re living in, and the economy is tied to the balance and imbalance of power. New regulations and tariffs are inevitable, and are constantly shaking up the economy. Everyone is bound to be affected by them, not just businesspeople.
Sometimes things will sort themselves out eventually. But when they don’t, people will have to adapt to the new reality. A dropshipper should be like a chameleon, constantly fitting into the environment. Standing still is suicide. Even when political stuff does get resolved, there’s a high chance that there will be a new equilibrium. Come to think of it, expecting things to stay the same is the tall order.
So, What Can You Do To Stay On Top In The Dropshipping Market?
It’s all about marketing, baby. When the market is so saturated, dropshippers will be fighting for customers and suppliers, so you have to maintain a good brand image to stand out and show them what value you can offer. Don’t bother with the question “Is dropshipping dead?” because it isn’t, but the inhabitants of this market will try to kill one another. Business is chaotic.
And so here are some tips on how to stay alive in such dire times.
Know Your Customers, Find The Niche
The quintessential step of doing business is knowing your customer. It’s important to know which product is trending among consumers, and what those consumers have in common to first and foremost pick a product to sell. Join online communities, conduct surveys, use analytic tools to find out what makes consumers tick.
Up until 2020 alone, the number of online shoppers worldwide has already reached 2.05 billion and is expected to reach 2.14 billion in 2021. Since not everyone has similar tastes, you can bet that there will be more niches immersing for you to take advantage of. But you can’t sit still and expect the genius idea to come, you have to research the market thoroughly, look in every nook and cranny to find the perfect products to sell.
If you’re stuck, I suggest you go for the safe niche - fashion. 61% of online shoppers go for fashion products. But beware, clothes go out of fashion quickly.
Know Where You’re Advertising
Facebook and Google are the 2 biggest platforms teeming with possibilities for dropshippers to reach new customers. But are they identical? Absolutely not! Well, unless you’re talking about the fact that they’re raising ad costs.
When people are on Facebook, they’re usually not looking to buy anything. So if you manage to get them to see your Facebook ads, chances are they will be mildly interested, but won’t have any intention to buy your products. Even if they’re interested, you might even be interrupting their viewing experience and make a negative impression on them.
Sure, you can convert on Facebook, but it will take the most intriguing copy and offers, which can be challenging for even experienced marketers, so your safest bet will be to use Facebook ads to capture leads.
On the other hand, Google is a much better place for converting. Simply selling within Google’s guidelines already guarantees a higher and safer ROI. Other than that, go for marketing tools that specialize in SEO to secure you a top search position.
Use Marketing Tools
Marketing tools are an important part of getting your brand across. The first and essential step of every successful business is market research. As mentioned above, it’s imperative that you find a good niche to start selling in. There are various online analytic tools for you to choose from, so consider these criteria when you are considering:
- Ability to scan multiple marketplaces
- Analyzing your competition with ease
- Clearly defining profit and expenses
- An all-round tool to streamline the process and save money
After analyzing and setting up your website, you might want to try pop-ups or scroll-stopping ads to let your visitors know about your promotions and discounts. Websites like Shopify will not only help you set up a beautiful storefront but also provide tons of helpful add-ons to help you with sales, customer analysis, and automatic order fulfillment.
In A Nutshell
“Is dropshipping dead?” is a no-brainer question. Dropshipping will continue to grow stronger, especially in times of the pandemic when most people stay indoors. Market saturation isn’t really a concern when considering whether dropshipping is really dead in 2021, as long as markets continue to shift.
It’s you who should have to strive to survive in the market as a dropshipper. As long as you can demonstrate your brand and product value, and successfully market your product, you have nothing to worry about. Always stay sharp!