Global eCommerce sales to reach nearly $3.46 trillion in 2019, up from $2.93 trillion in 2018, according to the forecast from an internet retailer. The global dropshipping market size was valued at USD 131.63 billion in 2019 and is expected to register a CAGR of 28.8% from 2020 to 2025.
Dropshipping is one of the eCommerce business which allows almost everyone to start their own hustle. This is not a get rich scheme. If done seriously like and given proper attention, there is no reason why the scale-up of business can’t happen. Have a look at the case study:
This is a client of ours who runs a Dropship website using Managed WooCommerce Hosting.
USP: is better clothes at more reasonable prices. Not to indulge in overheads like a Loyalty program, email list, etc. All the money that is saved with such overheads is forwarded to customers.
Niche: Women Fashion
Marketing: SEO + Influencer Marketing
- Inventory/Vendors: The website only deals with quality vendors with inventory of less than 40% from AliExpress (most people make this mistake and get most of their inventories from AliExpress).
- Price competitive: by developing great relations with wholesalers and are able to pass on that benefit to their clients. Which makes them one of the best-priced companies.
- SKU’s: over 150K SKU’s listed.
- Exclusive Products: There are exclusive clothes that are only available with them. This is about 30% of their inventory. They procure these from manufacturers in China directly.
- Customer Support: 24×7 Support via Chat and E-Mail and Phone. Most of the dropshipping websites don’t have 24×7 support.
- Data Quality & Process: All the data that is uploaded is done manually – keeping tight control over data quality. Most of the drop shippers will use the import plugin and get the products imported from AliExpress.
- Helps to reduce errors in our data quality
- Gives better images
- Unified product feel
Offices & Local Support: Most of the customers need local support for exchange, returns or pre-sales.
- Canada: Support North America & Brazil
- Spain: Supports UK, EU, South America (except for Brazil)
- India: Supports Asia, Australia
Google’s Proof: Dropshipping is not dead
What you can see is that dropshipping is having a lot of interest year-on-year basis. Surely, there is a dip in search due to the Corona Virus outbreak. Otherwise, interest over time is just increasing.
With the outbreak of the Corona Virus, people forced to work from home or take leaves, having a dropshipping business is making more and more sense.
Is Dropshipping worth the effort?
In short, it is worth the effort if done right. There was a person, where we were having a conversation. He started with AliExpress dropship business where they would buy make-up accessories for below 2$ and has listed them for over 20$ + shipping on their website. They were living in the hope that each day they will sell “x” number of items and become a millionaire in 6 months. All this was without SEO, Ads, etc.
When I was having a chat with him, the first point I asked him if people who will search your website via a search engine they would have also found the same AliExpress products cheaper on other sites or even AliExpress. He didn’t like this question. Well, rest is history – after doing a bit of social media and absolutely no SEO. They gave up on dropshipping in about 8 months.
The problem that we realized is that it’s not the business model that fails it is the expectation of people. So, if you are dealing with cheap products, then you need to have volumes to break even. It all boils down to the niche that anyone wants to focus on.
But when it comes to dropshipping business, we see that processes and quality are often neglected for profit. In fact, most dropshippers are using Shopify stores for their products. They don’t focus on maintaining high standards of their stores as they are selling the items through social media advertisements.
To ensure that dropshipping is worth your while, run it like a proper eCommerce business and you will see the results.
It is true that Dropshipping is dead in 2020?
Every year there are tons of articles that are written by people claiming that dropshipping is dead. Let me categorically tell you IT IS NOT DEAD. I am not stating the model has changed i.e. eCommerce business owners engaging with wholesalers directly for drop shipping rather than AliExpress or looking at various niches like health products or even CBD’s.
This is one of the main reason I refuse to read mass media or even what’s there on social media. I always like to check data and then conclude what my opinions are. This is not just me, but there are many forums like Quora, Reddit, etc where you will find equal number of people who will be for dropshipping models and quite a few against the same.
In fact, this is the right time to start your dropshipping business. Here is why:
- Extremely low capital requirements
- Reduced go-to-market time. There are ready turnkey websites available
- The world has embraced eCommerce
- In view of 2020 Corona Virus impact – dropshipping can be done from home
- Consumption is on the rise.
- Merchants understand the concept of dropshipping and are willing to work with them
- Can help with online paid marketing campaigns
Behind the envelop calculations
It depends on the average ticket size of your store niche. The calculations will change. For the sake of this article, we are taking an average ticket size which is thereby a lot of dropship stores.
If the average purchase value is 20$ and the sale value is about 40$ per item. It means you are grossing at 20$ per item. There are your overheads of Ads, SEO, other expenses which will be about 2.5K USD and expected net profits (EBIT) for about 5K USD or 60K USD per year.
- Your Gross Sales will need to be at 15K USD per month.
- 375 transactions per month
- 13 transactions per day
When we break up the numbers, it is plausible. From here all you need to do is start scaling up the business.
There are a lot of advantages of dropshipping. One of the main advantages if run properly is that a dropship website will increase in value, which you can always flip at a premium (about 20x to 60x average 6 months gross profit) apart from it giving you your regular income.
If you think about it, dropshipping is a serious business. Instead of looking for schemes to get rich quickly, focus on learning, researching, and understanding as to how the drop-ship business works. Don’t fall under the wrong assumption that if others have done it easily, you could do it easily too.
If you build your store, you can succeed based on your efforts, talents, and overcoming the hurdles that dropship business has. The reason there are drop shippers who earn tens of thousands of dollars a month is that they put in the hard work. Learn from your mistakes and you will see that dropshipping is very well business to be in.