Is Dropshipping Dead? (2022) Here's What You Need to Know
Is dropshipping dead?
In the past few years, dropshipping has become one of the most common online business models out there for new and old stores alike.
But plenty of people are concerned that it might be a dying business model.
And if not, how long will dropshipping be viable for new ecommerce businesses?
In this post, we'll touch on all of that and more.
But first, let's talk about what dropshipping is for the uninitiated.
What is Dropshipping?
In short, dropshipping is a business model for (primarily) online stores.
To make it easier to explain, let's define what the standard model is for an average store.
Normally, a business will identify a wholesaler to purchase products from.
Then, they'll order a set amount of products at a bulk wholesale price, and keep them in stock.
When customers want a product, they'll visit the store, and pay the retail price for it directly to the store.
Then, that store gives the product to the customer.
Here's where dropshipping differs from that.
Instead of keeping products in stock, a dropshipping store has no physical stock.
Instead, they take orders from customers at retail price, then use that money to buy a product at wholesale price, and have the product sent directly to the customer.
In essence, a dropshipping store acts as a middleman between a supplier and the consumer.
This comes with its own list of pros and cons, but the biggest advantage is that it requires significantly less upfront cost.
No consistent inventory to keep means that there's a much lower barrier to entry for new shop owners.
That doesn't mean dropshipping is without disadvantages, though, but we'll discuss those a bit further down.
How Does Dropshipping Differ From Other eCommerce Business Models?
Dropshipping is far from the only ecommerce business model out there, so what makes it different from the rest?
Dropshipping vs. Fulfillment by Amazon (FBA)
FBA is a business model that's become super popular as of recent.
It's different from dropshipping because, with an FBA business, you still have to purchase, keep, and manage inventory- But Amazon will store, ship, and deliver those products to your customers for you.
Dropshipping vs. Print-on-Demand
Print-on-demand is pretty similar to dropshipping.
With print-on-demand businesses, a business creates custom designs for white label products.
When a customer makes a purchase, the store sends an order to a supplier, who will then print and create the custom product and ship it out.
It's similar to dropshipping in that the products are only purchased from a supplier after the customer makes a purchase, but they differ because with dropshipping- The products don't tend to be custom-designed.
This means that print-on-demand stores often have stronger branding, but higher upfront costs, and lower margins.
Why Pick Dropshipping? The Pros and Cons
Just like any business model, dropshipping comes with a list of advantages and disadvantages.
Now that we've covered the question "Is dropshipping dead?", let's talk about why it might be a good choice for you.
The Pros of Dropshipping
- Low Upfront Cost
Since there are no inventory costs to upkeep, the upfront cost of a dropshipping business comes (primarily) down to your store subscription and your advertising budget. - Quick to Start
Since there's little R&D and the products already exist, dropshipping stores can be started much quicker than with many other business models. - Relatively Easy to Scale
One of the most challenging parts of scaling a business are in managing inventory and fulfilling orders. With dropshipping, much of those responsibilities fall into the hands of your suppliers. (Which does mean it's important to find a reliable supplier)
The Cons of Dropshipping
- Tends to Lack Strong Branding
Because dropshipping stores tend to sell products that are already finished, the products themselves tend to lack any strong branding. - Lower Profit Margins
Buying one product at a time means higher costs for each, which leads to dropshipping stores having lower profit margins than their counterparts. - Shipping Times & Product Quality Can be Dodgy
A decent share of dropshipping suppliers offer shipping services that are far from the lightning-fast speeds consumers tend to expect from Amazon, and quality control can be lacking at times.
This means that choosing the wrong supplier can lead to unhappy customers and high return rates.
Is Dropshipping Dead? Why It's Still a Profitable Business Model
Is dropshipping dead?
Will it die in the near future?
The short answer to both of those questions is no.
Dropshipping is far from dead in 2022, in fact, it's just as viable as ever.
With the right tools, tactics, and strategy- It's entirely possible to create a high-profit dropshipping business.
More than 35% of Amazon sales are fulfilled by dropshippers alone, and up to 30% of ecommerce businesses have adopted dropshipping in some way.
Which is to say, it's still a big deal.
But with that out of the way, it's time to discuss how to dropship.
Is Dropshipping Dead? How to Start a Profitable Dropshipping Business in 2022 in 5 Steps
Let's get into the nitty-gritty and go through a basic step-by-step to get you started on your dropshipping journey.
👉Want a more in-depth guide on how to start a dropshipping business from scratch? Check out our Definitive Dropshipping Guide!
#1) Pick a Store Type
The first step to dropshipping is to choose a type of store.
In general, there are two types of ecommerce stores to choose from if you're dropshipping.
A niche store or a general store.
Niche vs. General Dropshipping Stores
Niche stores tend to follow a theme. They revolve around a single product, or set of products that closely relate to each other.
While it's not dropshipping-based, Nike is a perfect example of a niche store.
On the Nike store, you won't find cooking supplies, video games, or books. You'll find nothing but athletic lifestyle gear and clothing.
That's because Nike's brand is all about the athletic niche.
On the other hand, Amazon is an example of a general store in the ecommerce world.
There's not just one type of product, Amazon covers everything from A to Z.
Both general and niche stores have their benefits and drawbacks:
General stores allow you to test and sell a wide range of products, but lack a strong sense of brand. You'll also have to compete with a wider range of stores if you run a general store.
Whereas niche stores have fewer products to choose from, but they can hyper-focus on creating a strong brand around their products.
Finding Your Niche
If you choose to go with a niche store, you'll have to decide on a niche.
Niches vary wildly, from the aforementioned athletic stores, to cooking supply stores, to pet toys and everything in between.
When choosing your niche, it's helpful to find one that people are passionate about, have a necessity for, or create hobbies around.
Common examples might be pet toys, art tools, or fishing supplies.
It can even help to use tools like Google Trends to identify hot niches at a given time, or search through various social media groups to find topics that might suit an ecommerce store well.
#2) Identify Potential Winning Products
After you've decided on a niche or general store, it's time to decide on the products you'll sell on that store.
There's a plethora of ways you can identify potential winning products, but here are a few general rules to follow:
- The Product Should Have High Potential Markups
Try to stick with products that allow you to markup the price by at least 200%. This will help you cover costs of shipping and other store costs while still turning a decent profit. - It Should Have Emotional Appeal
The best products have some sort of emotional appeal. Whether that's by catching the eye, targeting common passions, or for any other reason. - Aim for Products That Have Good Reviews
Reliable suppliers showcase reviews for each of their products from other dropshipping businesses and customers. Choose the products with an established reputation rather than taking big risks on untested products. - Pick Products With High-Quality Shipping Options
If shipping times are too long or products arrive damaged, you can expect lots of returns and lost revenue. Make sure to pick reliable suppliers with fast & safe shipping options.
As for suppliers to choose from, there are plenty out there- But two of the most common options are Aliexpress and CJDropshipping.
Be sure to do your due diligence and make sure your supplier is the real deal before starting to purchase from them And it helps to find a supplier that supports apps like Oberlo to make your life easier.
#3) Build Your Online Store
The next step is to build the store itself.
The easiest platform to build a dropshipping store on is Shopify, as it comes with plenty of apps and tools to help streamline things along.
Need guidance? Here's a guide on How to Create a One-Product Shopify Store (Though you can use it to help create multi-product stores too!)
After you design your storefront, you'll want to add some apps to supercharge your conversions.
Adding Apps to Enhance Your Shop
Here are some apps that'll help you create a high-profit dropshipping store.
1: Oberlo
Oberlo is practically a necessity for any Shopify dropshipping store.
It takes orders from your customers and automatically exports them to Aliexpress for fulfillment, so you don't have to manually order every product from the site yourself.
2: ReConvert
ReConvert is an upselling app that allows you to integrate post-purchase offers and thank you pages into your store.
It currently has over 3000 reviews on the app store and maintains a 5 star rating. (Did we mention that over 30,907 stores currently use it?)
3: Omnisend
Omnisend is a marketing tool that allows you to automate email and SMS messages to customers.
Using Omnisend, you can send custom offers, birthday discounts, and more. It's a highly powerful app that can help you recapture customers and increase sales.
#4) Design a Marketing Plan
Next, you'll want to decide just how you'll market and advertise your store.
The most common avenues for dropshipping stores are social media platforms.
Here are a few ideas that are great for advertising:
Though those are far from the only ways to market your business. SEO, email marketing, and influencer marketing are all great avenues for a store.
👉 Suggested Reading: How to Build a Killer eCommerce Marketing Funnel
#5) Test Your Products & Optimize Your Approach
And last but not least is where you put it all together.
After everything else is set up, it's time to put your products and marketing to the test to identify the winner(s).
Once you start marketing, you'll likely find that certain products outperform others. This is to be expected.
Once winners start emerging from the crowd, use the data you've collected to reoptimize your approach and refocus your efforts.
Is Dropshipping Dead? The Wrap Up
Is dropshipping dead?
No! Far from it.
With the tips you've learned today, hopefully you're even closer to starting your own successful dropshipping business.
Think we missed something? Let us know in the comments below, we'd love to hear from you!
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