Dropshipping is still profitable in 2023. But it's competitive. Now you need to be the best marketer and know how to make your ads and Shopify store stand out. Dropshipping is a supply chain-style fulfillment method of ecommerce headed for a valuation of $557.9 billion by 2025. You don't need inventory. You don't ship products.
But people fail with dropshipping because they don't take the time to learn the business model or how to research hot sellers. Others forget to focus on the customer experience and don't take the time to build trust with their target market. It's about testing and failing with multiple products. And it can take time to land a winner.
Plus, unlike the local lead gen model, where you control every part of your business, dropshippers rely on third-party wholesalers for the most vital components of their company. To be profitable in 2023, you need a product that will WOW your target audience or provide the best solution to a problem.
1. How To Be Profitable With Dropshipping:
There are 1.92 billion digital buyers and ecommerce retail purchases are rising (from 14% to 22% by 2023). But the competition is intense. With thousands of new people entering the dropshipping market every day. In 2023, drop shipping isn't sustainable in the long term. So, you need to approach the business model differently. Change how you conduct business and address these issues head-on.
Most traditional drop shipping stores don't focus on the customer. This can lead to negative customer experience & charge backs. Get enough charge backs, and your payment processor can get shut down. As a dropshipper, you rely on a third-party drop shipping supplier, which means you have:
Negative customer experience can lead to customers reporting your ad as a scam and it can lead to Facebook suspending your ad account. Also, because the drop shipping market is so competitive. It's easy for another drop shipper to copy your product and price you out of the market.
Drop shipping is the best way to find your winning product. But once you find a hot-ticket seller. Consider building a brand around your best dropshipping product to achieve:
- Higher Conversions
- Less Ad Spend Costs
- More Recurring Customers
How To Build A Brand With Your Dropshipping Store:
Branding your dropshipping store makes it really hard to copy your online business. And it will gain the trust of your target market. Increase your profit margins further with a mobile-friendly store. Mobile ecommerce sales hit $432.2 billion in 2021. And more than 51% of online shoppers prefer mobile over other marketing channels.
Mobile friendly means the site looks great on mobile. For example, this blog has a setting where certain font sizes and spacing is reduced on mobile so that it looks better on a smaller vertical screen. M-commerce makes it easy to shop from anywhere-anytime and offers benefits like:
- Personalized Shopping Experience
- Extra Marketing Channel
- Mobile-Only Promo Codes & Discounts
Ecommerce is gaining popularity and is expected to grow 50% over the next four years. People enjoy the convenience and accessibility of online shopping. Increased user penetration and higher disposable incomes also drive profitability with drop shipping.
2. Why Do People Fail With Dropshipping?
Mentality is a big reason why people fail with drop shipping. This isn’t a get-rich-quick scheme. There are no guarantees with this ecommerce style business model and dropshipping is hard. You need to be willing to invest the time and capital to learn the business model. You need to test and risk ad spend $ to find a successful combination of the right ad and product. Most people that fail simply gave up too soon and were persistent enough in testing ads. Stop worrying about the reasons why you might fail. Instead, focus on the fundamentals like:
- Niche Selection
- A Winning Product
- Marketing Strategies
- Customer Experience
Find profitable drop shipping products that people want to use. Items that solve a problem, save people time, or fill a gap.
How To Succeed With Dropshipping:
Tons of new people are getting started with the dropshipping business model every day. So, you need to be on-point with marketing your online store if you don't want to fail. Long gone are the days of testing 100s of products and hoping to hit it big. To be successful with drop shipping in 2023, you need to become the best marketer in your niche and make your customer a priority. Find a good example of a store or an ad that's performing well using software like EcomHunt or Commerce Inspector. Study their site and mimic their template while making it your own.
Tips On How To Elevate Your Dropshipping Store:
Dropshippers spend an average of $20 on customer acquisition. But the average conversion rate for a Shopify dropshipping store is 1.5%. That means out of 100 customers who go to your site-less than 2 people ever buy your product. So investing the extra time & money to make your store & brand stand out from the rest is how you give yourself the biggest chances of success.
3. Why Are Some Dropshipping Stores So Successful?
It's about customers connecting with your store on an emotional level. You need to invoke curiosity and trust. Dropshipping is still profitable but the stores that see repeated success share a few common factors. But it starts by creating a customer-focused store.
A website that includes:
But the number one reason some stores that use the business model prove that dropshipping is still profitable is that they've taken the time to build their brand. And establish themselves as a credible and trusted business.
81% of consumers say they need to trust the brand to buy from them. So, if you want to broaden your reach. Or increase profit margins, you need to focus on creating a brand and stand out from the competition.
Using influencer marketing is one such strategy to increase the trust of a brand. Consider connecting with a white label or private supplier. Add your logo and customized packaging. Be active on social platforms and lead with value. Take the time to connect with your target market.
Customer acquisition and retention are key to being profitable with drop shipping. You want brand-loyal customers. Repeat customers are easier to sell to. With a 60%-70% chance of converting. Known to spend more. They increase your word-of-mouth advertising and are an effective method to make your dropshipping store more profitable.
The sale isn't done after the customer buys your dropshipping product. Now is an opportunity to think about the customer. What they care about and how to provide the best shopping experience possible. You need to have a clear brand and a consistent message. One that meets the four pillars to securing repeat customers, including:
- Fast Shipping Times
- High-Quality Inventory
- Automated Marketing Techniques
- Build A Brand
How To Secure More Repeat Shoppers:
Fast Shipping Times:
With Amazon offering same or next day shipping. Customers aren't willing to wait 4-8 weeks for your dropshipping products to ship from China. AliExpress isn't a way to sustain your dropshipping business long-term.
Use this method for testing products to cut costs. But if you want to secure return customers, you need to find a supplier that can offer fast shipping times. It's all about efficiency for your customers. But luckily you have a couple of options to gain an advantage.
They have warehouses all over the world.
A fulfillment center and can supply certain dropshipping products.
Some products are priced lower than on AliExpress so you can play around with your shipping options and secure faster shipping times at a lower cost.
Pro Tip: Pay a bit more to source your product to get an advantage over your competitor. Plus, you can compete with big-name companies with fast shipping times. Just be sure to calculate your expenses and stay within a 2.5% profit margin/product.
Competitive fulfillment center offering fast shipping times.
Offer both wholesale products and dropshipping products (an option when you find a winning product and are ready to brand your store).
Shipping prices are a bit higher. (but if it fits into the 2.5% profit margin bracket, it might be worth it for your dropshipping store).
As a drop shipper, your goal with shipping is to always do what is best for your online store and still beat out your competition.
Product quality from sites like AliExpress can be questionable. It's a random game when it comes to sourcing your product. Add in the challenge of connecting with suppliers. But the platform is a great way to test products. When you find your winner. Consider sourcing inventory from local suppliers using methods like:
Google searches to determine online stores that offer dropshipping options.
Check out seller profiles on Amazon to see where they source their inventory.
Pro Tips: Add upsells to increase your AOV (average order value) and make more money with your dropshipping business.
Use apps like ReConvert to share a post-purchase one-click funnel. Here you can add a series of three upsells (boost your revenues 5%-12%)
Automated Marketing Techniques:
Dropshippers willing to go that extra mile will see higher repeat customers. Engagement and building relationships with your customers establishes trust and credibility. Achieve higher AOV. While spending less on customer acquisition with these simple techniques:
Add value after the purchase by sending a text or email thanking them for buying from your drop shipping store.
Consider sending an additional handwritten note (include a discount to stand out from your competition and track how well this technique works).
Send a follow-up email after the purchase and ask the customer how they're enjoying the product.
Build A Brand:
Branded drop shipping is taking generic products and private labeling them without handling fulfillment. It's like the dropshipping model. But you're creating a real brand and look like a real business. This alone is going to differentiate your store from the competition. Your store will create more trust and perceived value from your customers. Build your business around your winning product with these tips:
Get your orders up to 20/day (then ask your supplier if they'll provide private label).
Order in bulk with the white label to a company like DollarFulfillment or ShipMonk (they'll handle order fulfillment for low costs)
Pick a name for your store that's catchy and not close to competitors.
Create a cohesive and user-friendly site. One that's clean and user-friendly using a template from sites like GemPages.
Add reviews and testimonials.
Pro Tip: If you still want to source and ship your dropshipping products from China. You need to use a private agent. This is the best and fastest way to get secure connections. Get the lowest prices, best supplier, fast shipping times with the lowest shipping cost.
Private agents work for you. They can help with branding and create more consistency for your online store.
Find private dropshipping agents on sites like Upwork, Dropship China Pro and uDroppy.
Take advantage of multiple marketing platforms (TikTok is a golden opportunity right now). Social platforms take video optimization skills. Including stellar creatives, trending sounds, and an understanding of the algorithms.
But they are worth investing the time because they will help build trust in your brand and broaden your reach.
How To Broaden Your Customer Reach:
Don't neglect your organic growth. Respond to reviews and provide exceptional customer service.
Pro Tip: Drop shippers with a strong organic presence spend less money on paid advertising through platforms like Facebook and google ads.
"Repeat customers were also found to spend 67% more than new customers." LinkedIn
A few other ways to increase profitability include:
- Know What The Competition Is Doing & Be Better.
- Stay Relevant
- Be Unique
- Offer On-Point Pricing
- Add Product Ratings & Reviews On Your Site
4. Is Dropshipping Saturated In 2023?
Market saturation is when supply is higher than demand. In 2023 there are concerns that drop shipping is saturated. But that would suggest people are no longer interested in purchasing products online. And with e-commerce growing at a 14% YoY. That’s not the case. Of course, some products become saturated. Like trending items with short shelf lives. Or inventory that is copied by multiple drop shippers.
The dropshipping model is attractive to many would-be entrepreneurs. With its low-cost option, no stock required. YouTube drop shippers make it look easy to make fast money. Plus, it's not hard to copy a store, copy ads, and order inventory from Alibaba or Ali Express. But these techniques are falling short.
The dropshipping industry may not be saturated, but it's still competitive. So, if you're not using high-level tactics, you won't be successful long term. Drop shippers who want to see profitability will need to get creative. Because duplicating and replicating won't work in 2023. Here's why:
Paid Advertising Costs Are Soaring:
Facebook, Google, YouTube Ad CPMs all experienced a massive increase in 2021. With marketers spending 41% more on social ads. And 114% more for brand awareness, traffic, and reach.
Drop shippers who rely solely on paid ads will need to spend a considerable amount of money to leverage these platforms effectively if they want to make money with their dropshipping service.
YouTube Continues To Generate Interest In The Business Model:
Reliance On The Same Wholesalers/Suppliers:
Alibaba and Ali Express have dominated the industry for a long time, and are the popular choice for most beginners.
But when drop shippers are all using the same suppliers. Issues around lack of inventory, slower shipping times. Even the quality of products is compromised.
Be less concerned with dropshipping saturation. Or duplicating the competition. Instead, focus on sharpening your skills especially marketing. Learn the techniques that a lot of drop shippers aren't interested in pursuing and become one of the successful dropshippers.
There aren't shortcuts to success with this business model. And drop shipping requires more than social media advertising. Or copying your competitors. Treat your dropshipping business like an actual e-commerce platform. Behave like a business owner. Find the right product. Maintain a high level of customer support and you can be very successful with drop shipping.
5. Is Dropshipping Worth It In 2023?
You've seen the headlines. 'Drop shipping is dead'. Not true. The industry isn't dead. But it has lost some popularity and is a bit undervalued as a business model at the moment. At least when you compare it to other MMOI (make money online industries). Like Cryptocurrency, Amazon FBA, NFTs, and Affiliate Marketing. But that makes now the perfect time to open your dropshipping store.
Here's why you need to take advantage of this opportunity:
That's not to say drop shipping isn't competitive. But if you look at Google Trends. You can see a decline in searches. (people actively interested in pursuing this business model). Peaks and valleys in any business venture are par for the course. But in 2023, Shopify dropshipping is still worth it.
It's knowing what to do and the actionable steps you need to take during the highs and lows that count. Drop shipping is set to hit the $500 billion mark as early as 2027. If you're waiting for the right time-now is better time than ever. So you need to invest the hours in learning the business model. Focus on providing value and treat your store like a real business.
Why The Local Lead Generation Business Model Is A Better Way To Make Money Online
In 2023, dropshipping is still profitable. For example, it's common to generate $1000- $2000+/month. With the right product and ads, some dropshippers make big money for 3-6 months. But it takes time and daily effort. The niche you choose and the products you sell are crucial to your success. Unfortunately, most hot sellers and trending products have a short shelf life.
On the other hand, the local lead generation model builds and ranks generic websites in specific locations that offer a particular service. Get your sites to the top of Google, and they're like digital billboards. And in front of an active audience looking for what you provide. When your sites start producing leads, you can sell them to a local contractor for as high as 85%-90% profit margins.
Lead gen isn't about the latest trend or staying one step ahead of the curve. Instead, you provide a valuable service and help small business owners grow their companies. But drop shipping is still profitable in 2023. Of course, you need a great product and the best shopping experience possible. But if you're prepared to do the work, you can become a drop shipper success story.
Another great post, Thanks for sharing the insights.
Agree. Dropshipping has not gone anywhere and continues to develop. As a web developer at NFT Development Company Zfort Group, I can say that online earnings schemes such as Ecommerce, NFT games, cryptocurrency and decentralized finance etc. continue to evolve.
Thanks for commenting Steve. Have you tried dropshipping? I think people can still make money with the business model but the key is to always be one step ahead of the competition and come up with creative ways to market your brand. What would you say is the biggest challenge with dropshipping?
Yes, I've dealt with dropshipping. Buyers are pretty capricious people. Therefore, one of the main problems is dealing with returns if your customer does not like the product. Although, I think you have your own answers 🙂