The noise is gone, and the supposed gurus have now moved into other ventures. I now rarely see ads of dropshipping on my YouTube and social media pages, so it might be dead.
Well, far from it. Dropshipping is still alive and kicking.
What died is the hype. And this is a good thing for you and me.
Less competition, more profit.
Today, I want to share with you my thoughts about dropshipping, and to reinforce the fact that it is not dead.
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The thing with dropshipping is that many people have been lied to. A lot of pundits made it look soooo easy.
It isn’t easy. It is a real business that will take you to a roller coaster ride. It is an active business that requires serious effort, serious thinking, and serious focus.
It is not dead, so you might as well as start planning your dropshipping your business as early as now.
Statistics About Dropshipping
I looked at Google Trends to see how well dropshipping is doing in terms of search volume. Since this word is spelled two ways, I decided to make a comparison between dropshipping and drop shipping.
Here is what I found out:
As you can see, the separate words “drop” and “shipping” are not searched that much. But “dropshipping” is up. The search term bumped in Feb of 2017, and is still in an upward trajectory.
What does this say?
It says that there is a lot of interest on the business model, and it is not dead.
According to 3DCart, 24% of all online sales were fulfilled via dropshipping. That percentage represents a total of $85.1 million worth of transactions worldwide. Also, 33% of all e-commerce stores use dropshipping as a business model.
Every year, e-commerce grows by 17%, and if you do not get started now, you are missing out on the opportunity to build a business.
What is dropshipping?
While many people think that dropshipping is an online fulfillment business model, it really isn’t just that. The internet just made it easy, but it has been around for decades.
If you have ever watched a show on a TV shopping channel, that business model is similar to dropshipping.
Here is the process for a TV shopping network:
- TV has a show
- TV finds a manufacturer
- The product is shown and demonstrated on TV
- Customer calls a phone number
- Manufacturer ships the item
As you can see, it is not the TV production company that ships the item and it is not the TV production company that keeps an inventory. They earn a profit from the sales made form that show.
Another similar model is mail order. Companies put together brochures which they drop in physical mailboxes.
So what happens next?
- Homeowner calls a number
- He talks to the company that made the brochure
- The brochure company takes the payment, and orders the product from a manufacturer
- The manufacturer ships the item to the customer
Online, the process is the same, but everything is done on the internet.
In dropshipping, there are four parties involved:
- Dropshipper – this is you; you build a website and post other people’s products
- Web builder and payment processor – this is the platform you use to build your website and charge credit cards; and example is Shopify, and the payment processor is PayPal
- Supplier – the manufacturer who keeps on producing goods that you sell
- Customer – the person who orders the product from your store; does not know that the product comes from someone else
The wonderful thing about dropshipping is you do not need to keep an inventory. Unlike common businesses, you do not have to buy the products in bulk and store it in your house.
With dropshipping, your main duties are:
- Build a website
- Showcase the products
- Find traffic and market the products
Once a customer buys from you, you get paid. You use that money to order the product from your supplier, and the supplier will ship the product.
How do you profit from it?
It is simple. You sell a product at a price that is higher than the product cost and the shipping cost. If the product costs $25, and the shipping costs $5, you can sell it for $40 or even higher.
The difference is your profit.
Is dropshipping profitable in 2020?
It is true that many people failed in dropshipping. These are people who watched a YouTube video or two and decided they would go for it.
These people had no idea what they were getting themselves into. They had no idea how to create Facebook ads, or how to market their products. They do not know how to drive traffic to their stores, and they also had no idea what makes an online store work.
According to Statista, the projected e-commerce sales by 2020 is $4.9 trillion. That is right; it is a letter “T”.
By 2023, the projected global sales is $6.5 trillion.
Now, let us suppose that dropshipping does not grow and only accounts for 24% of all e-commerce sales. That still translates to $1.5 trillion.
What if you get a slice of that pie? Out of $1.5 trillion, will you be happy if your share of that pie is 0.0005%?
That is right, less than 1%, and there are four zero decimals before 5. That amount of money is $7.8 million.
So, what is not profitable?
Advantages of Dropshipping
For 2020, the noise has died down. With lesser and lesser false prophets, there will be also be less competition who would put up their dropshipping stores.
But this is not stopping companies involved in dropshipping to make the business model better, like Shopify, Spocket, and Salehoo.
You need to start your dropshipping plan now, as this is a long journey. There are so many aspects in dropshipping that you need to learn, such as how to build an effective store, how to do social media marketing, how to create ads that convert, and most importantly, how to choose a product.
As you learn, others will be left behind. Dropshipping in 2020 is a good year because the hype is gone. And with the hype gone, you can focus your attention to actually learning, and not spending too much time in success porn.
Yes, you may have spent countless hours watching useless videos about people who earned hundreds of thousands of dollars via dropshipping. And what do they do?
They offer you a course.
I am not saying that these courses are all bad. But I can guarantee you that only a few are legit.
As far as I am concerned, anyone who promises easy money is a crook.
Let us take a look at the advantages of dropshipping:
- Better services – Shopify announced that it will be offering a fulfillment service like Amazon does. What this means is that dropshippers will have to worry about shipping less, and focus more on marketing.
- No inventory – with dropshipping, you only have to buy the product once a customer already paid for it. If you sell on eBay, you have to buy in wholesale, put the products in your house, and then ship it yourself when an order is placed.
What if nobody buys? You have your money sitting on your inventory, with little chance to recoup your capital.
- Low-cost start-up – you do not need thousands of dollars to get started. You can build an e-commerce on Shopify for as little as $29. Also, you can register for a supplier directory for as little as $9 per month.
- Scalable – you can easily reduce the number of products you want to sell, or add more. If you want to build another store in a new niche, you can easily do that, too.
You see, dropshipping is what I would call a low-risk business. For as little as $50 per month, you can run an online business that you can grow over time.
No, it is not easy, but it certainly is worth it if you make it succeed.
How Much Money Will I Lose on Dropshipping?
Dropshipping on not free. Many people say that you can dropship on Amazon. The thing is, dropshipping on Amazon does not make you a credible seller.
Also, your products will just get drowned in a sea of the same products.
eBay does not allow dropshipping. It is banned. If you do not believe this, just read eBay’s policies about it.
In dropshipping, you have to pay for a monthly website subscription. A lot of companies allow you to do this, but the two best options are Shopify and WooCommerce.
Both are giants in the e-commerce industry, and both have created a platform with a single purpose—allow people to build e-commerce websites.
Because these two are the biggest, they also have the largest support by app developers. You need these apps to make your website more professional, or to put more functionalities that will help you in your marketing efforts.
The average cost of Shopify is $29 per month, while WooCommerce is free. The thing is, while WooCommerce is free, you have to pay for a domain name and hosting service.
Also, you need a dropship supplier director where you can source your products. If possible, avoid AliExpress.
AliExpress is a Chinese online marketplace, and a vast majority of the products come from China. The problem with AliExpress is that shipping can take months.
Use a dropship supplier tool like Spocket so you can find suppliers from a country of your choice.
Spocket is free, and you can upgrade later on to the paid service if you want more juice. The cheapest plan in Spocket is $9 a month.
I would say that $40 should be enough to start a dropshipping store. You need $40 per month to maintain it.
However, $40 does not include any budget for marketing. But if you are a hard worker, you can find traffic from your free social media channels and through your blog posts.
Who is dropshipping for?
Many people failed in dropshipping because they were lied to. It is not for everybody.
These supposed gurus made it seem so easy. It is not easy. Do you really believe that people will come flocking to your store just because you made one?
Can you give me one reason why I should buy from your store and not from Amazon?
Dropshipping is for people who:
- Are willing to spend money for their business
- Will put in the required effort to succeed
- Have spent countless hours learning about its different aspects
- Make objective decisions and do not have shiny object syndrome
You see, dropshipping is never a get-rich-quick scheme. While it is true that there are individuals who earned $300,000 in their first three months, these people are the exceptions, not the rules.
If you want to succeed, you need a plan, and you need to learn new skills on how you will execute these plans.
Do not leave your job to do dropshipping. The first thing you have to do is to secure a stable source of income, and do dropshipping on the side.
Is dropshipping worth it? Well, is making money that can soon replace your income worth it?
Before you go, remember that dropshipping, even if the business model is low-risk, is still a real business.
You have to spend money to maintain website, and you need marketing skills to be able to sell.
Dropshipping is no dead. It is as strong as a mule and you better start working on a plan now.
- Spocket Review: An In-Depth Look at the Spocket Dropshipping Supplier Tool
- Shopify Pricing: What Are the Different Features Between the Plans?
- Dropshipping Plan: What Do You Need to Prepare Before Starting a Dropshipping Business?