Dropshipping is a newer business model that makes supply and delivery much easier. Subsequently, the increase in the number of businesses registered for dropshipping in recent years raises the question: is dropshipping worth it?
Today, we’re providing you with everything you need to know about dropshipping and how the whole process works. Furthermore, we’ll include crucial details on the most popular dropshipping platforms, so you’ll know where to begin.
Is Dropshipping Profitable?
The simple answer is yes; dropshipping is a profitable business model. However, profits depend on various factors, such as the seller’s professionalism, experience, and knowledge, marketing efforts, the platform you’ll be using, and the amount of time you’re willing to spend to grow the business. The recorded dropshipping success rate nowadays is between 10% and 20%.
Still, it’s worth trying it out, as most ecommerce platforms allow you to grow your business with little to no investment. Moreover, the industry is growing at an estimated 7% year over year and is expected to reach $558 billion in value by the end of 2025.
1. What Is Dropshipping?
Dropshipping presents a way for ecommerce companies to outsource some business processes to a third-party company. This includes shipping, storing, and making products. The main thing to know about dropshipping is that these e-commerce businesses don’t own the items they’re selling. Instead, they work with manufacturers and suppliers who produce and ship the products to consumers.
Because it makes things easier for both the business owners and the suppliers, dropshipping has become increasingly popular in recent years. Businesses don’t have to keep large stocks of items in their inventory, while dropshipping suppliers have complete control of the delivery of their products.
In addition, customers are also benefiting because long shipping times are reduced. Products don’t go through numerous warehouses before being delivered to their doorstep. Moreover, items are more likely to be in stock. In recent years, many independently-run dropshippers started their businesses, which further highlighted the profitability of these businesses. However, there are many risks involved with these kinds of purchases, which is why most consumers still buy from reputable ecommerce platforms.
2. How Does Dropshipping Work?
The exact dropshipping process depends on the arrangement you have with your suppliers. The process is not always the same, but it generally looks like this:
It starts with a dropshipping supplier producing the product and making an agreement with an ecommerce business to sell them on their website. Then, once a customer places an order, the ecommerce platform processes it, and it is then relayed to the dropshipping companies and suppliers. Next, the supplier prepares the order and schedules the delivery.
In this whole process, the ecommerce business is simply responsible for taking the orders and serving as a middleman between the supplier and the customer. The dropshipping company takes care of everything else.
3. How Much Do Dropshippers Make on Average?
Like any other business, dropshipping comes with risks, and your earnings will vary as well. Factors that might affect your earnings in dropshipping include marketing strategies, market trends, experience, and what type of items you’ll be selling, among others.
However, we can tell you that, on average, the dropshipping income in terms of net revenue can be anywhere from $1,000 to $50,000 a month. When it comes to average net profit, the range is from $100 to $20,000 every month. These numbers show a typical profit margin of 10–40% per sale, where businesses fulfill anywhere from 10 to 10,000 orders a month.
4. What are the Most Profitable Dropshipping Businesses?
Your net profit in dropshipping depends on what you’re selling. While it’s difficult to predict the demand for certain items in the upcoming months, market trends show that the following niches have the best dropshipping products for profit:
- Personal fitness
- Baby products
- Pet supplies
- Home decor
- Gadgets and technology
- Women’s clothing
- Health supplements
Still, it’s hard to know how long these categories will be in demand. Doing your own market research and keeping yourself abreast of market trends will help you gain more profit.
Your research could consist of checking the best sellers on popular ecommerce websites, such as Amazon, eBay, and AliExpress. If that’s not enough, you could check Pinterest and Google Trends for popular product searches.
5. Is Dropshipping on Amazon Worth It?
Amazon is among the most popular platforms for dropshippers. According to the latest available estimates, dropshippers earn at least $1,000 a month on the platform. However, they can earn up to $50,000 if their brand is recognizable, they’re selling low competition but high demand products, their prices are competitive, and they provide excellent customer service.
Amazon dropshipping has a huge potential since the site is one of the most recognizable ecommerce websites with millions of customers. However, some dropshippers on the platform quit too early because they’re not making a huge profit or they have too many competitors. Despite that, there are those who like the business model, stick out, and start making huge profits.
Regardless, you should remember to check the seller agreement on Amazon’s official website to see if it will be a good fit for your business.
6. Is dropshipping on eBay Worth It?
eBay is another famous ecommerce platform (generated $2,732 million in the first quarter of 2021) that’s among the first choices for many new dropshippers. In case you’re willing to comply with the company’s dropshipping policies, starting your business on eBay would be a smart choice and could bring you significant dropshipping profit.
One of the main rules is that you’re not allowed to buy items from similar retailers, such as AliExpress and Amazon, who will ship the items for you. Even though that’s a common way businesses earn their profit, eBay is pretty strict about it. In case you fail to abide by these rules, eBay will remove or hide your listings or even suspend your account.
Still, dropshipping on eBay is an excellent idea as the platform has high website traffic and requires no upfront investment. Moreover, it provides you with enough flexibility in the way you’re handling the business, and you’ll be able to grow it with minimal risks involved.
7. Is Shopify Dropshipping Worth It?
According to industry experts, between 10% and 20% of dropshipping businesses succeed on Shopify. The platform has a fantastic help center with great tips on growing your business and running a successful dropshipping system. The average profit for dropshippers on Shopify is between 15% and 20%.
8. Is Dropshipping Legal?
Yes, dropshipping is entirely legal. Still, there are some regulations that you’ll have to comply with. These regulations depend on each state, so it’s better that you research the specific rules for your state.
In addition, dropshippers who register on popular platforms, such as eBay and Amazon, should also be aware of the dropshipping policies for those companies. Failure to comply can result in your account being suspended. Thus, one of the disadvantages of dropshipping is the number of rules you’ll have to follow if you want the business to stay afloat and succeed.
There you have it—everything there is to learn about dropshipping. As you can see, it’s a profitable business for those equipped with hard work and patience. Once you get the hang of it, you will be able to generate higher earnings and enjoy all of the benefits of this business model.
Hopefully, our article helped you evaluate all of the pros and cons of dropshipping. Good luck!