Dropshipping: Still Working in 2022?

Dropshipping used to be a very popular word amongst home-based business people. It was a breath of fresh air for e-commerce beginners due to multiple benefits, including a low entry threshold. But have things changed over the last 10 years? Does dropshipping stay a profitable business model in 2022? Riselane e-commerce experts will help you figure it out below.

The Benefits Are Still Here

Although the years of the booming growth of the dropshipping market have gone, this order fulfillment model still offers the same awesome benefits to entrepreneurs, including:

• Low entry & processing costs - all you need to start is a computer with Internet access and a simple e-commerce website, which is very cheap to build today;
• Low-cost scalability - dropshipping doesn’t require you to expand the office and storage spaces. All you need to do is expand the remote customer support service team;
• Flexible business location - you can start and control a dropshipping business from anywhere you want;
• Huge selection of goods to sell - you can choose any niche available on Amazon, AliExpress, or any other platform.

Figures

While the bare benefits of the business model are clear, the real figures will tell us a lot more. Here are several key dropshipping market metrics:

• It's a huge market - Market Data Research survey says that the size of the market was $128 million in 2020, while the compound annual growth rate of the industry is estimated to be 32% from 2021 tо 2026. Grand View Research estimates a 28.8% growth rate for the same period. This means that the estimated size of this market for 2027 is around $500 billion. Shopify alone observes from 46% to 110% growth every year;
• It really works - according to Statista, over 50% of sales on Amazon are driven by dropshippers and similar third-party retailers;
• Online buyers don't sleep - the overall size of the e-commerce market is whopping too. Statista spotted the growth of the market from 2.05 billion customers in 2020 to 2.14 billion customers in 2021.

The Cons Are the Same Too

Despite the rainbow-colored benefits of the dropshipping model and industry, you mustn’t omit the pitfalls, such as:

• Low margins - low processing costs and a high number of competitors makes dropshippers set competitive prices, which means very low margins;
• Supplier errors - as your supplier works independently from you, you can’t ensure that all the deliveries are done properly. If you don’t have strong relationships with suppliers, shipping mistakes will occur regularly and scare away customers;
• Poor branding opportunities - in most cases, the supplier is responsible for product branding, so buyers won’t see your store logos on the items they buy, which might lead to lower retention and trust rates;
• Inventory tracking complications - without direct access to the inventory, it can be very hard to track the availability of items in the supplier’s warehouse. Fortunately, you can solve this problem by negotiating the use of the same inventory tracking apps with your supplier.

What about competition?

If you are asking yourself about the competition growth in the dropshipping industry, you should know that there’s no reason to worry. Of course, low entry costs attract crowds of sellers to the industry, but the demand grows at an identical rate. Similar to traditional retail business, you need to research the market to find the profitable niche and figure out how well your competitors work. The last requires keyword analysis with the use of special marketing tools. This way, you can find niches with the lowest competition to minimize your marketing efforts.

Still Alive?

Now that you can easily compare the current pros and cons of the dropshipping business model, you can also decide if it’s an effective way for you to emerge in the e-commerce market or not. If you want a quick conclusion, then, yes, dropshipping is still profitable if your approach is right!