Is dropshipping still profitable in 2022? Yes, this is usually the big question in the minds of new entrepreneurs considering the dropshipping business model or even those who may have tried dropshipping in the past and maybe took a break from it. This article answers the question for all would be dropshippers as well as provides insights that experienced dropshippers can draw from to make important decisions on their dropshipping business.
The dropshipping e-commerce model has made a lot of entrepreneurs rich over the past years. Since dropshipping became popular a lot of people have jumped in on the opportunity to sell products and make good money without having to invest a lot of money in stocks. This is one of the primary reasons dropshipping became very popular, especially for young entrepreneurs who do not have a lot of money to start their own business.
Facts of profitable dropshipping in 2022
The fact that with little funds anyone can start their own ecommerce business and sell almost anywhere in the world is just so welcoming in the ears of any business-thinking person. All the logistics problems can be solved by a third-party logistics company (3PL). This way you don’t need to use any force to ship the product to your customers. This makes the drop shipping business an attractive option for many people who desire a personal business.
Since its popularity, a lot of people have taken up space on the internet using e-commerce platforms like Shopify, WooCommerce, Wish to start up their own dropshipping business. While others have subscribed to e-commerce marketplaces like Amazon, E-bay, and Walmart to sell tons of products to customers across continents.
This popularity of dropshipping is making people believe that the dropshipping space is huge and there are fewer or no more opportunities for new entrants or new products. Some have even argued that the dropshipping business model has died like a trend that has lived its time and gone for the next trend to take its place. Is this real? have we witnessed all that dropshipping business model? Or is it just a momentary dip that would see a rise in the success waves again? We take an analysis on this to answer all of these questions and other concerns you may have in the ecommerce entrepreneur space.
The advantages of profitable dropshipping in 2022
There are many positive things to draw from the dropshipping business model. And this should encourage you to engage in this thriving business. In addition to the zero inventory requirement we mentioned earlier and the logistical burden covered by a 3PL service, there are some key advantages of dropshipping. We will list them here. And we hope this will encourage you to decide to do a drop shipping business. Or just to encourage you to decide to get involved.
Low start-up costs
One of the biggest barriers to starting a business for most entrepreneurs is the capital investment or money to start in the first place. Businesses that use a dropshipping strategy avoid the need to invest funds in inventory acquisition or the establishment of a warehouse to store their products. Aside from that, there is no need for them to invest time managing their inventory or hiring employees to fulfill orders. Therefore, dropshipping offers a low barrier to entry, as it allows entrepreneurs who lack the financial resources at the start to establish a retailing operation to do so through a dropshipping supplier.
Orders are not fulfilled based on the size of the physical location or the number of employees required to deliver the order. So drop shipping merchants can scale quickly without sacrificing quality. As a result, dropshipping remains highly beneficial for entrepreneurs who are already in the industry; or have already tried a dropshipping business. Some businesses may experience fluctuating sales or generally low sales due to seasonal variables or other factors that are not favorable to their business. Even with such difficulties, dropshipping can still maintain steady growth.
In 2022, dropshipping is still profitable and will continue to be a profitable e-commerce business model the distant future. Over the years a lot of entrepreneurs have been able to scale their dropshipping operations without having to take more burden with regard to work, but have used the same readily available resources with dropshipping supplier companies to raise the level of their game in the business.
Inventory management costs are minimal
Retailers benefit from dropshipping because it eliminates the need to retain physical inventory. This decreases the operational burden they must bear. In addition, they do not have to spend time controlling inventory, managing the infrastructure that contains it, or handling delivery, as these tasks are outsourced to third-party vendors. Now, this is the catch. Most people believe that this is only possible when you run a small store with say 20 – 30 orders a day in one or two markets but this is largely untrue.
There are many entrepreneurs who do hundreds of orders per day through the dropshipping model. In fact, there are dropshippers who use the same model of doing 5-10 orders per day to do dropshipping. The only thing we recommend is that; when you are making this many sales per day as a dropshipper, it is time to contact your dropshipping provider. Negotiate a better deal with them. For example, you can ask the supplier to place your product closer to any market you serve for faster and smoother fulfillment.
Product lines with a wide range of alternatives
A very powerful advantage of dropshipping is that it opens the door to serving the market with a wider range of product alternatives. Dropshipping allows retailers to niche products that are not common in traditional e-commerce stores even the big market place stores. This allows dropshippers to quickly get good traffic to their stores and become popular. Then comes the opportunity to add more products and grow to a massive store with a customer base already retained from initial hot selling products and niche products.
Many drop shipping companies have adopted this strategy. Now they offer a large number of products whereby they will not be able to offer as many product options. This is because it will create a demand for storage space. But because of the drop shipping business model, now small and medium entrepreneurs can now host massive stores. So they can start selling a diverse range of products.
Dropshipping allows for greater flexibility in a number of ways for retail business. With products, you can quickly get your products and packaging branded to help with your strategy of growing your brand. This is the trend and future of dropshipping. The good thing is this can all be done with little to zero extra workload on the entrepreneur. As a dropshipper with a good dropshipping supplier company as partner, you can always request branding and customization services for your products and packaging. The best dropshipping supplier companies offer cost-effective product and packaging branding solutions. So you don’t incur an unbearable cost for this.
In terms of business location, drop shipping allows entrepreneurs to run their businesses from any location they choose. This is something you can’t do with traditional retail. What this means for entrepreneurs is that they can run their dropshipping business while pursuing other dreams and goals. For flexibility in product pricing, dropshippers can easily adjust their pricing strategy based on market conditions. Pricing adjustments are very timely given that they are not buying large amounts of inventory and docked in warehouses. So you can quickly know how the situation affects the price. In this aspect, the dropshipping system is faster than the traditional set-up people.
Some challenges of profitable dropshipping in 2022
There are some drawbacks to dropshipping that have developed over time. Although dropshipping is now a widely used eCommerce retail business model, however, certain unique obstacles associated with it have always existed. In order for your drop shipping business to be successful, you must properly align your business. This is the way to avoid some of the problems we will mention. But don’t worry. There is always a way to handle your business that will safeguard you from these challenges. As an entrepreneur, you must now know that all businesses include some risks and challenges. Some must even run risks. However, this does not stop your business from being successful and prosperous.
So, things like taxes and seasonal fluctuating shipping cost that may affect profit margins and other legal concerns are challenges you have to live with as an entrepreneur in the dropshipping business. Other challenges that you can manage in other to keep your dropshipping business profitable include;
Concerns with third-party dropshipping suppliers
Dropshippers are largely dependent on their dropshipping suppliers to a great level, this is also true for those who employ marketplace services like AliExpress, which is also popular with dropshippers who are just starting off. But for the more experienced dropshippers the business standard or best practice is to use a professional dropshipping supplier. When a third-party supplier fails to fulfill an order as promised, the dropshipper is responsible for the cost of the order whenever the customer files such a complaint. Not having a reputable supplier capable of understanding your business needs and product strategy can have you investing more time and energy than you bargained for into managing customer services issues.
Additionally, if a dropshipping supplier is affected by issues within their operating location or for some reason goes out of business, this will have a significant effect on the dropshippers business as money could be lost and time to switch to a new dropshipping supplier could add up to slow things in your operation as a dropshipper. It is therefore VERY IMPORTANT to start off with a reputable and soldi dropshipping supplier from the onset.
When you compare it to the drop shipping business model, traditional retail will have more control. So they’re less likely to be influenced by that external factor. That’s where they have an advantage. Even if their suppliers are impacted, their business will continue to run. And having a large inventory will give them more time to find a replacement. So they can look for a new supplier. For dropshipping, it was important to quickly develop an effective contingency plan in the event of supply chain disruption.
Now this does not just have to do with only the dropshipping supplier as they are also linked and dependent on logistics services. This brings more parties into the scene of dropshipping, and with more moving parts comes the potential for tear and wear from time to time. Issues such as product availability and quality control are not uncommon in dropshipping. Dropshippers have lesser control on what happens on the manufacturing and production side of their business. But this boils down to having a solid partnership with a dropshipping supplier as they literally an extension of your business.
Because of its simplicity just about anybody can take advantage of dropshipping. And this just leads to more and more competition as should be expected in your calculations as an entrepreneur. Unless your company has entered into an exclusive deal with a supplier to dropship specific products, there is nothing to prevent competitors from selling the same products you do on their websites.
As a result, dropshipping companies may have some difficulties in differentiating themselves from their competitors. This is because they cannot offer products or services that are exclusive to their respective brands. However, dropshipping needs to differentiate itself in other ways. For example, providing an amazing customer experience, or creating a memorable and user-friendly online shopping experience for customers.
Profit Margin Constraints
The dropshipping business model is known to take some part of what would have constituted an extra profit for dropshippers because it includes delegating a portion of the order fulfillment process to a third party. However, sales volume can cover that. It is always better to view it as important areas needing servicing when considering your entire dropshipping value chain.
Customer service challenges
When something goes wrong with an order, giving customer help to resolve the problem is more challenging for dropshippers with little or no control over their inventory levels. DDT may need to work with third-party sellers to resolve customer questions about the product. Some customers claim that the product is defective or they never received the product. This is when you have difficulty reconciling. This results in additional effort and administrative overhead compared to completing the order fulfillment process without the vendor’s involvement. Therefore, the importance of having a dropship vendor can be very huge. Some dropshipping suppliers offer very good customer service issues covering returns and refunds; this type of service will help eliminate this challenge.
Is dropshipping still profitable in 2022? I think you already have an answer now. We are very optimistic about what the future holds for dropshipping as a business model. It offers enormous advantages to e-commerce as a whole such that the benefits massively outweigh the challenges. And seeing the success stories and the level of involvement by high-caliber entrepreneurs, this business model is here to stay and will continue to thrive. We have seen many entrepreneurs bringing some innovative marketing approaches to the dropshipping business that have become a massive success. We believe that more innovation to the dropshipping business model will help it become even bigger than it is now as more and more entrepreneurs come into the space.