Is dropshipping dead? Topics like this occurred since 2016. People keep asking the question year by year even the successful dropshipping business is booming. Four years have passed, dropshipping model is not dead. Moreover, it advances further.
Look at the news of the big companies. Shopify reaches cooperation with Google in April and Tik Tok in October this year. The websites launch apps on the Shopify app store to provide convenient advertising. Shopkeepers can increase their exposures by installing them. Those companies smell a massive demand and enter the market immediately. There is no doubt that opening an online store will meet a new growth point. So do successful dropshipping businesses.
Dropshipping is not dead. There is a good prospect in the short term and long term business. It is still profitable, whatever in 2020 or the further future.
Why do people think dropshipping business model is dead?
The exposing problems of drop shipping make the question come insight. The market fails to keep pace with rapid growth and cause imperfect circumstance. Negative comments come after, which form a passive atmosphere. Online business beginners are mostly affected. In addition, the coronavirus in 2020 raises the nerve.
1. The Ongoing COVID-19
COVID-19 has strongly beat the global economy, not only real business, but also online business. It’s out of expectation that the epidemic lasted for such a long time. For real business, a lot of shopkeepers close their store. Because there are few people shopping, national policy or for safety reason. The lasting impact, together with growing cross-border cooperation, makes the situation worse than ever. The consequence of the economy is unimaginable. In the beginning, many countries shut down their customs. Shipped products are returned. Logistics companies are forced to face huge challenges. Online business is difficult to continue, except anti-epidemic products. However, it’s not only the challenges for logistics companies and shopkeepers but also the suppliers. Unpredictable delay of the package cut off their living. A number of suppliers have no choice but to close down their factory.
You can imagine the result. Suppliers are the source of a river—their absence directly affects online stores. With a shortage of marketable dropshipping products, ecommerce stores make an unaffordable loss. Even if dropshipping suppliers are enabled to deliver products, the long shipping time is a disaster for the stores. Customers reduce sharply due to unsatisfactory delivery.
COVID-19 forced a lot of ecommerce stores to close and raised death concerns about dropshipping model. However, the situation is getting better. Logistics has returned to normal in most countries. Now delivery matters reduce as well as the suppliers. Dropshipping businesses breathe again.
2. Competitive markets
Setting up a dropshipping store is easy these days. Platforms like Shopify, AliExpress, Amazon and eBay give convenience support. Drop shipping can be a kind of small business. Network and computer are all it needs. But, there is never a way of getting rich quick. The easy operation is a double-edged sword. It blooms market and competitions.
More and more people join the competitive markets for the cake. It’s unrealistic that people have an equal bite of it. As competition rises, the profit margins that dropshipping stores can take get fewer, beginners in particular. People who have just set up their online stores are likely drowned in the game. They have lost the business opportunity to rob customers from the very beginning. And only a few spaces are waiting for them. Because of the narrowness of survival, some may quit and draw to a conclusion: drop ship is dead.
So, is that the real case? In fact, it may not be that bad. Competitive markets do leave relatively fewer business opportunity and profit margins.. Non-competitive ecommerce business owner is the principal victim. But it also stimulates creative ideas. New niches and innovative dropshipping products emerge continuously. So, dropshipping is never a short term, but long term business. There’re still many opportunities for latecomers. Distinctive and high quality products are the key to win the competition. Moreover, the dropshipping business model is not at its peak at present. The market is still in a growing trend.
3. Inescapable Complaint
People know well about the power of comment. It’s critical to an ecommerce business. The recommendation will light up the future while the complaint makes it dim. People who hold a pessimistic view on starting a dropshipping business focus on its complaints. They believe complaints matter the business and lead to a dead end.
Complaints are commonly to see on Shopify dropshipping platform. Reviews about delivery time and dropshipped products quality are endless. It illustrates the cons of the business– long shipping time and uncontrollable product quality. Each of them can be a crushing blow. It takes 12 to 30 days to deliver a dropshipping package. Imagine how a customer feels about the long waiting. Not to mention he may receive an unsatisfied product. An unhappy customer will not return but leave lethal complaint to block new buyers. The end of such dropshipping stores is to disappear in the market.
No wonder why people ask, is dropshipping dead? The immature marketplace accounts for the problems. No product inventory means a small amount of money for starting a dropshipping business. But at the same time, store owners lose control over the quality of shipped products and delivery time. Because dropshipping suppliers are in charge of fulfilling the customer’s order. Unqualified suppliers provide low quality products and delay shipping time. These will increase customer dissatisfaction and eventually ruin the store’s reputation. The problem is hard to fix, and complaints are inescapable at present.
Even so, the pessimistic view is excessive for a developing business. It’s only three years since the explosion in 2017. Dropshipping in 2020 is improving, and complaints will decrease in the near future.
4. Decrease in Profit
Drop shipping not only brings business opportunity to online store owners but also to companies who serve them. The increasing participants that start selling drop shipping products arise service demand, such as finding dropshipping suppliers, picking a niche, store design, marketing, advertising, etc. Naturally, platforms for online store business owner occur. The charge and demand for customer service usually go hand in hand. As a matter of fact, that’s why shopkeepers feel less profitable in recent years.
The market develops rapidly, for instance, Shopify dropshipping. Since the Shopify App Store program was announced in 2009, app developers have launched over 11.6M app installs on Shopify. Now you can find 5000+ apps on the page. Dropshipping app is ranked in the first place on the categories. And Finding suppliers is next. Those are two hot issues in running a dropshipping store.
Not all apps are free. Here is a chart about Shopify dropshipping apps. Most of them provide free trial or free for basic. But, shopkeepers have to pay certain fees for more services. And some even charge $299 a month. To survive in the competition, shopkeepers have to take acceptance and cut their profit margins.
Moreover, advertising becomes a heavy investment. Shopkeepers force to join the campaign to enhance store recognition. Common social media like Facebook, Instagram, Youtube, Tik Tok are fierce battlefields. Shopkeepers have to pay more and more ad fees to get exposure. Advertising costs are different according to a report of 2020. In CPC (cost per click), Facebook ads charge $0.97, Instagram ads for $3.56, and Youtube ads for $3.21. In CPM (cost-per-thousand-impressions), Facebook ads charge $7.19, Instagram ads for $7.91, and Youtube ads for $9.68.
Those apps and social media weight a lot and decrease profits. The frustrating result encourages the word about dropshipping’s death.
Is dropshipping worth it in 2020?
Dropshipping is worth doing because of the potential market. A proper mode to start the business is critical to share the cake. Use a reliable dropshipping platform and social media is recommended.
Online store running can be divided into two parts – customer order fulfillment and brand promotion. A drop ship platform can help with the former while the shopkeeper does the latter.
A professional dropshipping platform can save the shopkeeper’s time and effort. For example, EPROLO helps with the following work:
- Product sourcing
- Product quality control
- Order Auto-import
- Delivery arrangement
Shopkeepers could take months to find suppliers and profitable drop shipping products. But now, EPROLO takes over the work and do quality control. Dropshipped products are listed on the platform. The only thing for the shopkeeper is to add and sell products on his store. Moreover, EPROLO provides auto order fulfillment. By connecting to the store, the platform will process orders and send packages to the customer directly.
With efficient help, shopkeepers have more time to sell products. Social media is a good way to attract customers and enhance brand recognition. Facebook, Instagram, and Youtube are the most commonly used. Effective promotion requires plenty of learning. Shopkeepers should be familiar with the operation and update.
Though there are difficulties, dropshipping is still a profitable business.