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magento & ecommerce

​​Is Dropshipping Dead in 2020?

The dropshipping industry was worth $102.2 billion back in 2018. In the period that started in 2019 and ending in 2025, the industry is expected to achieve a compound annual growth rate of 28.8%. This growth is anticipated because people are increasingly shopping online. This, plus the rise in cross-border eCommerce trading.

So, not only is dropshipping not dead in 2020, it’s at the beginning of exponential growth. But why are people raising this question? Perhaps it’s because of a wariness that innovative business models give way to new advancements.

Dropshipping became popular with eCommerce store owners in the early 2000s, but it’s actually much older than that. It’s been around since the days of catalog shopping in the 60s and 70s. Why buy inventory when you can ship directly from the manufacturer, distributor, or dealer, right? But then, people are still doubtful that this model is lucrative to get into.

It doesn’t help that there are misconceptions that cause people to think that dropshipping is a dead business model.

Dropshipping Misconceptions

Misinformation is how misconceptions are born. And here are the most common to keep in mind.

The Hype Is Gone

As mentioned, dropshipping is a trend that has been around for quite some time. Now, this misconception is spread by people who have a superficial knowledge of dropshipping.

They think that dropshipping is no longer a buzzword is enough to mean that the hype is gone. In a sense, yes, the hype is gone but only for people who fall out of the dropshipping target group. This means that dropshipping has actually found its target audience and it’s being pitched to the appropriate people.

Every trend takes time to find its target group. Dropshipping has been successful in this department.

So, how is the dropshipping hype doing? The frequency of dropshipping keyword searches has grown a lot in the past few years.

Dropsurfing Will Replace It

Some think that it already has. But what is dropsurfing? Well, it isn’t really a thing. This term means sourcing products with the best prices and fulfilling incoming orders. Yes, it does sound interesting, perhaps more lucrative than dropshipping even. Which would be great if dropsurfing was unique.

Whenever you go through AliExpress looking for the best possible deals, guess what? That’s dropsurfing.

This, in effect, means that dropsurfing is nothing more than a part of the dropshipping business model. It’s a branch of dropshipping that calls for having multiple suppliers lined up.

So, if someone bought a fancy refrigerator for $1000 on your eCommerce store that uses the dropshipping model and you have multiple potential suppliers, you’d select the supplier that has the lowest price (to you) to fulfill the order. That fridge is going to get shipped out from the supplier directly to the buyer and you keep the difference for doing practically no work.

If anything, dropsurfing is going to promote dropshipping even more.

Extreme Competition Has Killed Dropshipping

In business, the fear of competition is real. Although it is a healthy thing that pushes companies forward and fuels the consumer-driven US economy, competition is a clear and present threat to many businesses.

Since there are so many people engaged in dropshipping, the competition has gone through the roof, right?

Not exactly, as you only have to worry about online shoppers. And the number of online shoppers is only going up. As long as digital commerce lives, dropshipping will too.

It’s Dead Because There’s No Money in It

Dropshipping is quick to start and easy to run. Most entrepreneurs are taught that nothing easy can last or stay profitable. First of all, this is because people think that running a dropshipping business is all about dropshipping. In reality, there are many other aspects to consider.

Also, dropshipping won’t work for any retail business out there. However, as long as the dropshipping method fits your needs, there is no reason to go around it.

If this doesn’t clarify things for you, let’s take a look at the numbers. By 2021, it is estimated that global dropshipping sales will go over $1.5 trillion. There is definitely enough to go around.

Ad Costs Are Destroying It

Facebook and Google ads are necessary for a dropshipping business. These ads were cheap 10 years ago but not anymore. But you’ve just got to understand that this is the reality of things. 10 years from now, you’ll probably find yourself thinking, “Damn, Facebook and Google ads were so cheap in 2020.”

If you really think about it, ad costs on Facebook and Google are underpriced. That’s why everyone uses them and many of them get a positive ROI. Of course, you’re going to have to know what you’re doing with your dropshipping ad campaign to do the same.

Dropshipping Tips for 2020

There is always a right and a wrong way of doing things. The wrong way, in the case of dropshipping, is doing it differently than the right way. If you pay attention to the following tips and apply them, you can succeed in dropshipping in 2020 and beyond.

Market Research

Market research is a crucial aspect of doing business. Whether you’re trying to get into the market, come up with business ideas, or introduce an innovation, you can’t do it without market research.

Dropshipping isn’t an end to itself but a means to an end. It can be an invaluable asset for market research if used properly. For instance, instead of stocking inventory, you can use dropshipping to “test drive” a product. If it proves to be a hot seller, you can consider stocking it.

Strategic Shipping

Ideally, you’d love to be able to ship to every single corner in the world. And you can, but you’re going to have to earn shipping discounts and do it affordably. That may not be possible in the beginning.

With dropshipping, you don’t have to worry about this too much. It’s a perfect solution for those locations that fall outside of your target regions. For example, if you have a French supplier, you’d be able to fill orders in most parts of Europe relatively affordably.

Maintenance Avoidance

By not storing certain high-maintenance products in your warehouse, you are cutting a lot of costs. This includes heavy items, fragile products, valuables, etc. With dropshipping, this isn’t something you have to worry about.

Dropshipping Lives On!

As you can see, dropshipping is far from dead. It’s starting yet another upward spiral. Of course, what you need to understand is that dropshipping may not be for you. Another important thing to keep in mind is that dropshipping is best used tactically and intelligently.

Dropshipping allows eCommerce companies to avoid inventory costs. Unlike physical retail stores, which have to pay employees and rent, inventory costs are usually by far the biggest cost for online stores. By virtue of cutting these costs out, dropshipping can help you to maximize your eCommerce efforts.

Dropshipping lives on!

By interactivated • on May 30, 2020

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