The quick answer is yes, it will work in 2020. Many people think that dropshipping is nothing more than a business trend. While there is truth to that, the dropshipping business strategy that we know today is nothing more than a tip of the iceberg.
It is not true that dropshipping began in the 2000s. In fact, it has been around since the 1950s. The business model is so simple. The only parties involved are the manufacturer, the dropshipper, and the buyer.
For as long as the manufacturer of the product is willing to ship the item to the end-user, which is the customer, then the only thing missing is the seller, which also called the dropshipper.
Today, you will learn about why it works, and why it is not too late to invest in this business.
What is dropshipping?
Dropshipping is a business process where a seller attempts to convince buyers to make a purchase of an item. This seller, called the dropshipper, does not manufacture this item. He also does not keep an inventory of these items, and he certainly does not ship these items.
The process for dropshipping is shown below:
- Dropshipper advertises the products
- Buyer pays for the product
- Dropshipper orders the product from the manufacturer
- Manufacturer ships the item to the customer, not the dropshipper
This business model is so effective, and so profitable. When the internet reached the international community, this business model became easier to implement.
Today, you can find suppliers globally, and you can also sell globally. All you need is a website where people can find the products that you are selling.
When there was no internet, the only people who can do dropshipping are those who have deep pockets; they have to spend on newspaper advertising, flyers, or TV advertising.
Today, all you need is a website, a social media channel of your choice, and you can start selling.
Dropshipping has become the most popular business model today for online marketers. It is much more profitable than affiliate marketing because you are selling a physical item, not courses or e-books. A customer will receive a physical item, and will be much happier than someone who bought digital goods.
Is dropshipping profitable?
Yes, it is highly profitable. The reason behind this is that you do not have to build a brick-and-mortar business. You also do not have to buy your inventory because you only have to make a purchase after a customer already paid you.
The way you earn money is simple. If a manufacturer sells an item for $20, and will cost $10 to ship it, you need to sell it at a price that is higher than $30. Surely, you have to factor in the cost of your advertising, your website maintenance costs, and others.
If you sell it for $50, the customer will pay you $50. You will pay the manufacturer $30 for the item and the shipping fee, and you are left with $20.
From this $20, you will pay taxes and other fees, so it is likely that you will earn about $10.
It is profitable for a single reason: you do not shell out money unless someone makes a purchase. In a typical business, you have to buy the item first and then it will get stuck in your house. It might not even sell, so that is already a loss.
With dropshipping, the only fixed cost you have to pay is your website maintenance. You can avoid this altogether if you only sell via Facebook or other social media channels.
You are also in control if you do not want to advertise. If you are great at writing ad copy, you do not have to spend a dime. All you need to do is participate in forums and groups, and then convince these people that you can supply them what they need.
If you decide to have a website, you only have to pay about $20 per month. With that money, you can build a Shopify store, pay $20 per month, and enjoy the benefits of a full e-commerce business complete with payment gateways, order management systems, and so much more.
Will it work in 2020?
Certainly, why not? Dropshipping has been around for 70 years. It will stay as the most profitable business model. The only thing that will change is the technology.
As mentioned earlier, the old methods used in dropshipping was to print flyers and distribute them to the public. Today, you have the internet on your hands. All you need to do is to learn the tricks of the trade, and then you shall be ready to start your own dropshipping business.
Dropshipping is not a trend. It used to be one, and many failed because these are the very same people who are looking for ways to make a quick buck. Drosphipping is a serious business that requires marketing skills, patience, and a lot of analysis.
Simply put, it requires a lot of hard work to make it work. Many negative people always say that dropshipping is dead. It is not dead but it has become too competitive. And if you are not ready to face competition, then you are not cut out for this business.
A few statistics about dropshipping
To help you understand how dropshipping is going to work in 2020, it would certainly help if we look at a few facts so you can get inspired.
Here are some mind-blowing facts about dropshipping and e-commerce put together:
- The number of people buying goods online is expected to increase from 1.5 billion people to 2.4 billion people in 2021.
- By 2020, the revenue from sales in e-commerce is going to hit four trillion dollars
- About 27% of retailers are now doing dropshipping to help them reduce the cost of running their business
- 23% of annual sales from online businesses are from dropshipping; this means there is still a lot of room to grow
- The annual average annual sales of dropshipping is 85 billion dollars
- 33% of online stores today use dropshipping as a business model
- E-commerce grows at a rate or 17% annually and dropshipping grows with it
- 34% of sales of Amazon is from dropshipping what this means is that one of the biggest companies in the world is involved in this business model
As you can see, dropshipping is not dead. There is only one way to go and this way is up and forward. For every dropshipper who did not succeed, it opens an opportunity for you to start your own business and grow.
How to succeed in dropshipping
To be able to succeed in dropshipping, you need more than just determination. It is a serious business that will cause you a lot of headaches. The thing is that it is a business that has very low risk, and yet the rewards are unlimited.
You do not have to be an expert to succeed. However, you should know what you are doing. You need to invest time and energy on research and planning your business before you launch it.
Here are some tips to help you become a profitable dropshipping business person:
Website development skills
You do not need to know how to make a website. There are many drag-and-drop platforms in the world. These are systems that do not require programming skills. All you need is to drag your photos and upload product descriptions to build the website.
You can use Shopify, Magento, WooCommerce, WordPress, BigCommerce, and so many more to build your website. The particular skill you need is design. You should be able to create a website that has uniformity. It must be stunning, and it must be catchy.
Sales and marketing skills
After putting up a stunning website, the next step is to let people know that you are here, that you are selling high-quality items at an affordable price.
As such, you need to have marketing and sales skills so you can create advertisements online that will generate traffic and revenue for your business. You do not need to be a graphic artist. You can hire these people to create the art work for you.
The specific skills you must have are:
- Knowledge about how Facebook and other social media advertising work
- Knowledge about what kind of ad copy works
If you have both of these, you can instruct your graphic artist to create great ad copy, and you will place these advertisements on the right platforms.
Customer service skills
Do you know how to manage an angry customer? Do you know how to set their expectations?
Customer service skills are important if you will sell something. Part of your duty as a sales person is to make sure that your customers are happy. You cannot pass the blame to the manufacturer if the shipment was delayed. You also cannot pass the blame to the manufacturer if the product shipped is of low quality.
As a dropshipper, you are the face of the business, and customers will think that the products you sell are also manufactured by your business.
To succeed, you should be able and be ready to give due compensation to your unhappy customers.
Do not be shocked with these skill requirements. They sound difficult but anyone can learn this. But you have to be committed and dedicated to succeed.
The cons of dropshipping
Dropshipping does not come without risks. And to help you understand these risks, below are some of the things that can happen as you move along in this industry.
- Shipment can take a while
- You have no control over the quality of the products you sell
- Most of the time, you can only sell unbranded products
- Most dropshipping manufacturers are from China so your customers might think that your products are cheap
- Product prices can change without notice
- Refunds can take a while, and this can be bad for you and your customers
There is always a solution to these problems, and you cannot avoid these problems because you only function as a middle person between the customer and the manufacturer. Today, there are software programs that will automatically update your price list if the manufacturer increased his prices.
You can also find dropshippers in the US, UK, or other countries that sell high-quality goods. However, be prepared to sell these items at steep prices, too.
What should you be ready for in 2020?
In 2020, there will be more people involved in the dropshipping business. As time goes by, more and more companies will build platforms or software programs that will make it easier to build a dropshipping business.
You must be prepared to face competition, so you must always read about the current happenings and trends about e-commerce.
Dropshipping is not dead and it is very well alive. It will continue to grow in 2020, and it will certainly become better and bigger over time. As we enter another year, the only thing to think about is how you can stand out from the crowd. You must be able to offer a brand and value to your customers to set yourself apart.