Dropshipping is more saturated than it was five years ago. Dropshipping isn't dead. But the rules have changed, and the business model is a lot more competitive. Research shows that global dropshipping will continue to grow at 28.8% until 2025, so there's still money on the table with the business model. But it takes advanced skills and ability to make your store stand out to be profitable with dropshipping in 2023.
Now you need to design superior ad creatives and provide the best customer experience you can. Dropshipping is about having ads that grab the attention of your target market. But unlike the local lead gen model that gets organic traffic, dropshipping relies on paid traffic. Plus, it's so easy for another dropshipper to come in and steal your winning creative or underprice you out of your own market.
3 Reasons Dropshipping is Getting More Saturated
1. More Dropshippers Each Year
Very simple cause of this business model becoming more saturated is the fact that there are so many YouTubers promoting it as one of the main ways to make money online.
Google Trends shows us steady increase in people interested in Dropshipping since 2014. Every new business model gets more saturated each year, but dropshipping saturation seems accelerated. Because the gurus are promoting it as an easy way to make money online, unlike most proper businesses that's got barriers to entry like big start-up costs, in dropshipping you don't even need to buy inventory.
2. Low Barrier to Entry
Out of all the popular online business models out there, dropshipping has the lowest barrier to entry.
You can copy anyone's FB ad or Shopify store so easily and find the same supplier for these products quickly from Alibaba. Unlike SEO or local lead generation that takes time (3-6 months) before you can rank a website, in dropshipping you can get your site up and running and getting paid traffic in 1 day. So the reason that drop shipping business is so easy & fast to start, unfortunately, is the same reason this business model gets saturated the quickest.
3. Winning Products Tracked by Competitors Quickly
When you do all the testing to find the winning product and winning ad, and you start scaling the ad, it's only a matter of time before your competitors find out about it. Not only will FB will target your ad to competitors with no discrimination. There are places like EcomHunt that track successful dropshipping campaigns.
You can easily find top performing ecommerce products and what kind of FB ads they're running along with engagement, product cost, how much they're selling it and where you can find it on Alibaba. But this means you won't be the only one selling your dropshipping product for too long.
Why Product Saturation Exists in Dropshipping
Technically, Shopify Dropshipping cannot reach market saturation because it's simply a method of marketing & delivering a product to consumers using online paid ads & suppliers shipping products directly to customer.
The e-commerce industry is growing 23% year-over-year. And over 2.14 billion people worldwide made online purchases in 2021. So as the amount of ecommerce sellers go up so is the demand.
However, product saturation can absolutely happen in dropshipping.
Most Shopify Dropshippers rely on Facebook ads for traffic. With social media ads, you can hit massive scale faster than ever before. But this means it doesn't take long for a successful ad & high converting product to reach a few million users.
And when other dropshippers catch on to the product & ads, they too will start running something similar and pretty soon that product will tap out its audience on social media. The ad can reach what's called ad fatigue.
It doesn't mean that the product doesn't have anymore potential buyers, but you can get to a point where the product doesn't convert high enough for it to be a profitable dropshipping product any longer. Also, keep in mind that with dropshipping you're going after impulsive purchases on social media, the products need this special quality:
And it targets a specific niche audience.
Stay ahead of the trend and get in on the action before saturated dropshipping products stop selling. Unfortunately, dropshipping isn't the most long-term, passive business because these products that have this "Wow" quality don't last long once ads hit scale.
Dropshipping is not dead, but it became a lot harder
When people are asking if dropshipping is over-saturated, it means they're asking if this business model is still worth it in 2023? or is it still profitable?
It's no question that this business model became a lot harder than it was in 2015. The days are over where you can throw up an ad for $50-$100 and make 2x profits. Back then, just seeing FB Ads promoting physical products was rare.
Companies Have Increased the Production Level of Ad Creatives
Today, not only are we inundated with FB ads promoting products, but we see high production ads like these:
For a simple khaki pants, this company produced a whole comical skit out of it. And studies show that having original creative media is one of the top ways to increase the CTR of your dropshipping ad.
Facebook Has Gotten A Lot More Strict & CPC is Higher
When there were fewer people running e-commerce ads, Facebook was a lot more lenient on what they allowed on people's ads because FB is trying to make money off the ads. But today, we face a situation where there's more people buying ads than Facebook's ad placement inventory.
The demand for buying ads is greater than Facebook's supply. And supply & demand law dictates that now Facebook has the power to be a lot more strict in their ad policy. And cost per click (CPC) is higher today.
You need to be more selective with suppliers (long shipping times will kill your business)
The days are gone when you can pick any supplier from AliExpress and have the product ship from China with long shipping times and expect for your drop shipping business to do okay. Facebook is cracking down on these types of stores that provide poor customer experience.
If your product takes longer than a month to arrive, your customers will flag your ads, file complaints, issue chargebacks which will all lead to your ad account & payment processor getting shut down. But there are Chinese suppliers that hold inventory in the states and other co-sign 3rd party inventory holders that you can use, check out this list of dropshipping suppliers with fast shipping.
Copy What's Already Working
What they teach most dropshippers is to find viral products and copy that same business but make things bit better than what the competitors are doing. Product saturation is part of dropshipping, it's inevitable. It's all about getting in while things are hot or going viral. For example, let's say there's a viral product like this with great engagement.
As a drop shipper, your job is to study the ad, the store layout & price and try to do it better.
You need to think outside of the box. And outshine your competition. Experiment with things like creating bundles, personalizing your packaging, and unboxing experience. Or offering lower price points and discounts for customer loyalty.
Undercutting competitor prices is a common practice. Some dropshippers will lower the sales price but try to make up for it by increasing the shipping cost. You're going up against 12-24 million e-commerce sites worldwide. But less than one million of those sites see more than $1000/year in sales. So while there are a lot of players, very few are making real money with their dropshipping business.
Enhance the product page
Look at 5-6 competition pages and look at 5 great things they're doing with their pages and make one combining the best elements. Innovative technology has made it easy to facilitate online shopping.
AI is also playing a fundamental role in the expansion of dropshipping. Tools like chatbots, AR/VR enhancements, and product recommendations. Create 3D models with companies like sketchfab. These are all ways to drive user engagement and expand your customer base.
Enhance the Creative
Getting a high-converting creative (ad media) is the most important aspect of dropshipping.
There's two places highly recommended amongst dropshippers in 2023
1. Viral Ecom Adz - offers multiple variations of ads
2. Dropship Media - offers ads across multiple social media platforms
Use Adspy to search for the product and it will pull up ads that other competitors are running.
These are viral ads that already did really well. Just like the product page, study 5-6 competitor's ads. Then go to the ad creative company and ask them to make the ad for you, tell them all the things the competition is doing well and also come up with all things that can be better. But maybe you can add something that they didn't mention about the product.
Dealing with product saturation is part of the game for succeeding in Dropshipping. As a drop shipper, your job is to milk a viral product as long as possible and then once it reaches complete saturation and stops converting, move on to the next viral product that's already promoted by others.
However, as more people do drop shipping, the duration of how long a product stays profitable will go down. Of course, you can still gain a competitive advantage by becoming superb at coming up with great ad creatives and adopting new ways of doing business.
3. Why Dropshipping Is Still A Profitable Business Model:
There are a few reasons why dropshipping continues to be a viable business model:
Increasing Social Media Adoption & Engagement
75% of the world's population is predicted to be online in 2022. That's 6 billion internet users. And set to hit 7.5 billion by 2030. But even more impressive is that 93.5% of those internet users are also online shoppers. And 35% of US adults have purchased items through social media channels.
People spend an average of 2 hours and 51 minutes a day on their phones. Increased accessibility and rising disposable incomes also mean kids are getting cellphones younger. And 56% of children between 8-12 have a cell phone.
Take advantage of how engaging social media is and how nothing comes close to social media's ability to steal attention. Leverage platforms like Facebook, Instagram, and Tik Tok, and their highly specific ad targeting to get interesting products in front of the right people at the right time.
This ability will always drive sales. Impulsive purchases has always been one way humans buy things. Not everything we buy was planned. There's always that product that we purchased just because it caught our attention while we were browsing.
Being a dropshipper is about being able to capitalize on that behavior. Follow the trend and see what types of content is driving the most engagement. Come up with a plan to do something similar but improve upon it.
Increasing Presence of Foreign Suppliers
"Manufacturers who take part in dropshipping are 18.33% more profitable than manufacturers who rely on conventional channels, since they're not as dependent on the inventory space of retailers."
More suppliers are starting to do dropshipping which is great for dropshippers because it creates more options for products and price competition.
Not just dropshipping but platforms like Amazon FBA have exploded foreign supplier's sales & channels of revenue which has caused them to produce more products, again the more products they produce the better for dropshippers because it's more opportunities to find the next viral product.
3rd Party Dropship Service Providers
There's companies that are making it very easy to track viral ads and even make the viral ad creatives.
The companies we covered in this article alone provide massive advantage.
Ecom Hunt & Adspy both allows you to track competitors ads.
And then there's these 2 companies that create video ads for you.
Viral Ecom Adz and Dropship Media
These resources are huge time savers and removes a lot of the hassle from dropshipping, as time goes on there will be more innovative ways to create & track ads.
Is Dropshipping Still Worth It in 2023?
You can definitely still make money with dropshipping, it's not as easy as it once was, meaning that your winning product will not stay profitable long-term since there's just that much more competition that's also tapping into the same audience with the same product.
If you get couple months' worth of profits, consider yourself lucky. But it's still a solid opportunity to make some fast money if that's what you're after. Ultimately, there's still some major issues with drop shipping model as a long-term business.
Due to the above reasons, many dropshippers eventually get serious about building their own e-commerce brand. In this article, I explain the major difference between dropshipping vs ecommerce
Dropshipping is getting more saturated. But product saturation is simply part of the game. When one product reaches saturation, there will always be another product that you can begin promoting. Using the model of copying what's working, which is possible with drop shipping, removes a lot of the guesswork.
Then the most important job is to jump on viral products before they get saturated. The key is to stay on top of trends. Leverage the top strategies and be ready to do the hard work to set up new Shopify stores, create killer ad creatives, and test multiple products before you land a winner. But if you're new to making money online, be open to trying anything because you'll learn a ton from all your experiences.
Once you start making money online, invest the time and resources into more consistent and long-term businesses. Dropshipping gives you that exciting, quick rush of jumping on trending products. But the business model lacks longevity and consistency. That's why I suggest people check out local lead gen if they're really serious about making money online in 2023.