Is dropshipping worth it in 2022? What are the odds of finding success with dropshipping in 2022, and is it even profitable?
These are some of the questions we often get asked by wannabe dropshippers looking to launch their eCommerce business in 2022.
The long and short answer to that question is a definitive yes.
Dropshipping is still viable and profitable even in 2022. A lot of entrepreneurs have leveraged dropshipping to build wealth for themselves. If they can, so can you too.
But, becoming a successful dropshipper is no mean feat. If it were, everybody would be into it right now.
You need to understand how dropshipping works and all the nitty-gritty details that go into it to improve your chances of finding success.
This is what this post is all about.
In it, you will learn about dropshipping and what it is. Also, you will get to see for yourself the reasons why dropshipping is profitable. In addition to that, we will discuss the pros and cons of running a dropshipping business.
What is Dropshipping?
One of the biggest challenges to running a store – whether online or brick-and-mortar – is managing inventory. You have to procure stocks, store, and ship them whenever a customer makes an order.
Not only is this tiring and cumbersome, but also expensive. The worst part is that you might end up stocking products you will never sell.
However, with dropshipping, it’s an entirely different ball game. You don’t have to worry about keeping inventory – it’s exclusively your supplier’s responsibility.
The best part is that you also don’t have to give yourself stress about shipping – that job also falls on your supplier. How cool is that?
How does dropshipping work?
Let’s assume Alex, a fictional character, comes to your online store to purchase, say, a leather bag. Immediately after confirming her order, what you will do is to contact a supplier that sells the bag Alex wants to buy.
You provide them with Alex’s order details. You also supply them with Alex’s home address. If Alex paid you $50 for the bag, you might pay the supplier $35. The markup is your profit.
Once the supplier confirms your payment, they will ship the bag to Alex. She gets her bag, she’s happy, and you made a nice profit. No stress, no fuss, no inventory whatsoever, yet you made a nice profit of $15.
Here’s a graphical representation of the entire process.
As you have seen, a dropshipping business is simple and easy to set up and run.
You can even set one up without owning a website. There are a lot of successful dropshippers who don’t own a website.
Is dropshipping actually profitable? Can you make money from it and achieve financial freedom, especially if you don’t have much ecommerce experience under your belt?
Let’s find out!
Is Dropshipping Profitable?
The simple answer is yes. Dropshipping was profitable in the 1990s when it took off. It is still profitable today despite what the naysayers are saying.
Here are some interesting stats that back up that claim.
- The dropshipping industry was estimated to be worth over $128 billion in 2020. That figure is expected to grow to over $476 billion by 2026. That’s a lot of money, isn’t it?
- 33% of online stores use dropshipping for order fulfillment. Not that many stores would be dropshipping if it isn’t profitable.
- Many sellers on Amazon use dropshipping for order fulfillment as well. The figure is between 22 to 33% of sellers. You can bet that these sellers are making a lot of money.
- Manufacturers that have adopted dropshipping are 18% more likely to make more profits than their counterparts who have shunned it. You see, manufacturers, too, are minting cash from dropshipping.
If these stats don’t convince you that dropshipping is profitable, we don’t know what else will.
Pros of Droshipping in 2022
Do you want to know why dropshipping remains an attractive option for entrepreneurs even in 2022? Read on!
Here are the pros of dropshipping
1. Easy to start
One of the things you need to sort out before launching a store online is setting up a website. And setting up an eCommerce website is not easy. You’d have to worry about a domain name, hosting, and all the technicalities about websites.
This might be a serious challenge if you are not a techie.
But with dropshipping, you don’t have to worry yourself about setting up a website. You can run your dropshipping business on Facebook, Instagram, or even on Whatsapp. We know quite a number of dropshippers who are doing this successfully.
And if you decide you still want a website, you can easily set one up using Sell The Trend SHOPS.
2. Cheap to run
No inventory, no shipping, no warehousing. You can literally start a dropshipping business with nothing.
This is why a lot of people are getting into dropshipping.
In fact, even when you’ve successfully built up your business, you won’t spend any money on storing and keeping inventory. What you will mostly spend money on is marketing and ads.
What about shipping?
Your supplier takes care of that. How cool is that?
3. Lower risk
There will come a time when you want to try out a new product to see if your customers will like it. But what if they don’t buy and you tie your business capital down?
With dropshipping, you don’t have to worry about that. To test a new product, all you need to do is to add it to your product listing and wait for customers to place an order. When they order, all you need to do is purchase the product from your supplier and ship it to them.
You don’t have anything to lose anyway.
4. You can run your store from anywhere in the world
Running a dropshipping business comes with a lot of freedom. You can run your store from anywhere in the world – all you need is a computer and an internet connection.
This might not be possible if you were to run a regular eCommerce store, no thanks to inventory management.
5. Better cash flow
Nothing can be frustrating as putting a lot of money into stock and waiting for months for customers to buy them off.
Dropshipping saves you this nightmare because you won’t have to stock inventory for long. You only buy when a customer makes an order.
Cons of dropshipping
If dropshipping were that easy and cheap to start and run, why do some retailers still prefer conventional online retail stores? The simple reason is that dropshipping has some cons.
Here are some of them.
1. Fierce competition
Low entry barrier to dropshipping can only mean one thing: fierce competition!
Thousands of wannabe entrepreneurs are getting into dropshipping by the day. The problem is that there are not that many customers to go round.
So, there is a good chance you will get frustrated out of business by market competition.
2. Handling returns can be a frustrating experience
It’s much easier to handle product returns if you keep an inventory.
But since you are buying from a supplier and shipping to a customer, handling returns is a bit harder and complicated.
Often, you’d have to keep customers waiting for a long time to get a refund because it takes a while to send back products to suppliers and process a refund.
3. Your reputation is at stake
In dropshipping, you don’t have much control over the quality of products your customers receive. The best you can do is to work with a reputable supplier in the hope they will consistently deliver quality products.
Even at that, you can still get disappointed.
Your reputation as a dropshipper can be ruined if your supplier fails to deliver quality products to your customers or doesn’t deliver on time.
4. Building your brand name can be difficult
Another drawback with dropshipping is that you don’t have much control over your product packaging. Your customers will receive their orders in packages from suppliers with a different name, logo, and branding from yours.
This often leads to disappointment and confusion on the part of your customers, and can make them shun your store completely.
5. Cut-throat pricing
Due to high market competition, often, dropshippers resort to pricing their products at low rates just to win sales. At this rate, making profits would be really difficult.
The best way to get out of this rut is by creatively differentiating your dropshipping business by focusing on a particular niche, offering excellent customer support service, etc.
How to make dropshipping worth it
But what if they don’t buy and you tie your business capital down? But you have to be willing to put in the needed work.
That being said, here are things you can do to make dropshipping a worthwhile experience for you.
1. Invest in marketing
The “build it and they will come” concept doesn’t work for dropshipping. You have to invest a lot of money into marketing to connect with your customers and generate sales.
Facebook and Google ads, influencer marketing, affiliate marketing, etc., are all good options to try.
2. Make your return process hassle-free
Processing dropshipping returns can be excruciatingly frustrating. Not only will you lose sales, but your reputation is also at stake.
However, going out of your way to make it easy for your customers to return products they don’t want can boost your business, actually.
The reason is that when customers know they can return a product they don’t like without hassles, they will want to buy from your store with careless abandon.
3. Only work with reputable suppliers
The reputation of your dropshipping business is largely dependent on the supplier you work with. So, do your best to ensure you only work with a reliable, reputable one.
4. Offer free shipping
Online shoppers love free shipping. In fact, most will not buy from you if you don’t offer free shipping. And as studies have shown, 9 out of 10 shoppers expect free shipping from retailers.
So, by all means, offer your customers free shipping.
Ready to Get Started?
Is dropshipping worth it in 2022? It’s a definite yes for us.
You can still make a lot of profits from it regardless of the competition.
It is important to use the right tool to make the most out of your dropshipping business.
This is why you need Sell The Trend.
Sell The Trend is an all-in-one dropshipping platform that allows you to automate your dropshipping product research and other repetitive tasks, connect with suppliers within and outside the US, and more.
Also, Sell The Trend allows you to automate order fulfillment with ease.
Ready to try out Sell The Trend to see how it will help your business?
Sign up for a free trial right away.