Does Dropshipping Still Work In 2020?

With more people buying online than ever before, dropshipping has gained some serious momentum over the past few years. However, whether there is room for others to start dropshipping remains to be seen. 

As an online business model, it’s a relatively low-risk method of starting a business, perhaps as a side hustle or for someone studying and looking for a little extra income. But does dropshipping still work in 2020? We explore this in more detail. 

How does dropshipping work?

Dropshipping is a business model that enables a business to sell goods without holding any of them in stock. When a seller or shop sells a product, they then purchase the item from a third-party before having it shipped directly to the customer. 

The key difference between a dropshipping business and a traditional business model is that the seller never holds stock or inventory. The seller simply purchases items from the third party as and when the customer orders them. 

For example, a person selling beauty products will receive an order through their online shop which will then be sent to the wholesaler who packages up the order and ships it directly to the customer. 

Does dropshipping work?

When determining whether dropshipping works, it’s important to understand that the success level will depend on the goal. Dropshipping can work for someone looking to earn a modest profit as a side business, but it might not work for someone looking to make a large profit in a short time frame. 

As a low-cost and low-risk business model, dropshipping can be great for people who want to dip their toe in the water of electronic commerce and test out their online business ideas. It can give you an indication of what products are worth selling, how online businesses work and also helps to build customer service skills.  

Customer service is imperative for success in dropshipping, especially since many businesses use social media as a means of both marketing and ordering, where people skills are a must. If you are good at speaking to people and building relationships, then dropshipping may well just work for you.

However, dropshipping can be difficult and you might not earn the amount you expect for the amount of effort you’re putting in. It’s important to manage expectations when determining whether dropshipping will work for you, especially if you are planning to start an online business alongside other commitments.

In addition, due to the popularity of dropshipping over the years, there are now a number of problems that sellers face. Issues include low-quality products, high cost of goods, long shipping wait times and lack of professionalism from other drop shippers which can have a negative impact on you. 

Is dropshipping profitable?

Online retailing has boomed in 2020, with record numbers of e-commerce activities taking place all over the world. Because of this, dropshipping is reasonably profitable, if you can sell the right products at the right price and to the right audience. 

In most cases, dropshipping does not offer a high profit margin. When you’ve factored in the cost of advertising, purchasing the product and shipping, it’s very little in comparison to selling your own products or services through your online store. However, if you can sell huge volumes of products, and quickly, then there is an ample profit to be made. 

It’s also worth pointing out that dropshipping isn’t a guaranteed ‘get rich quick’ business model. Although many people have created successful businesses with dropshipped goods, they are few and far between. For example, AliExpress has taken years to build worldwide recognition and Gymshark started out as a dropshipping business before evolving into a global organisation. Wayfair is another business that successfully uses dropshipping.

Research is imperative when it comes to making a profit through dropshipping. You’ll want to ensure your shipping costs are as low as possible as this is where a huge portion of your profits can be lost. In addition, you’ll want to ensure the products you buy are affordable, whilst still enabling you to make a profit. However, the cheapest is not always the best and you should always test the quality of products before agreeing to buy through any dropshipping suppliers. 

To help you make more profit, you could also make smart decisions when it comes to marketing your business. Starting a blog and utilising affiliate marketing can be effective tools to promote your company’s products. There are also several other methods of marketing your business online for free that could be taken into consideration. 

It’s important to understand that dropshipping is not a passive income model; at least not in the early stages. But with an effective strategy, you can acquire a consistent income in the later stages. As your business grows, consider reinvesting your profits into hiring freelancers or virtual assistants in order to reduce your workload.

Is dropshipping dead?

With the level of people turning away from the traditional brick and mortar store and opting to shop online through mobile devices, it’s fair to say that dropshipping isn’t dead. In fact, dropshipping is thriving and there is certainly money to be made. With dropshipping being so easy to set up, it’s unknown how many businesses utilise this method, but the topic has become increasingly popular over the past five years and is becoming an increasingly crowded marketplace. 

Like any business, the customer should come first, and dropshipping is no exception. Before setting up your business you should ask yourself, would you rather sell to 10 people one time each or 5 people who repeatedly buy from you?

It is worth noting that just because someone has bought something from you doesn’t mean they are happy with their purchase and may want to return it. A slight issue with dropshipping is that customers cannot always return items to the drop shipper due to the logistics of the business model, so refunds are often the only viable option. Good business people will go above and beyond to rectify any situation which helps to gain repeat custom and avoid bad reviews. Just like all business models, if you create a business that provides value then you will succeed and be profitable. 

Another style of dropshipping to avoid is arbitrage and a good example of this is people who sell on Amazon and then find a third party to purchase from on eBay. 

As long as you do it right, we believe that dropshipping is definitely not dead. Provide value to your customers, sell the products that people want to buy and avoid taking advantage of people just for profit. 

Start your dropshipping business

As a simple and reasonably safe business model, dropshipping still has a place in 2020, and with record numbers of people shopping online, we think it’s only going to keep growing. 

If you’re thinking you might be ready to start your dropshipping business, we offer virtual office addresses that can give your business the professional image that will set you apart from the competition right from the start. In addition, we can also help you with legal, IT and accounting support with our business concierge monthly subscription.

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Your complete business toolkit

Rovva puts everything you need for your business in one place. From an accountancy helpline to a drop-in business lounge - we've got everything covered.

Your complete business toolkit

Rovva puts everything you need for your business in one place. From an accountancy helpline to a drop-in business lounge - we've got everything covered.