Is dropshipping still working in 2019? Is it still a good business model to start with?
More than 95% of Aliexpress dropshipping stores die within the first few months. We will discuss the drawbacks of the business model & what it takes to survive in the dropshipping industry. So, here are some truths I learned the hard way:
1. Skills
Yes, you don’t need an MBA & engineering degree to get started. But remember it’s e-commerce. You need a massive amount of knowledge about business & technical parts of e-commerce for good results. Truth is, most drop-shippers won’t ever self-educate themselves. If you are ready to spend a huge amount of time learning all that ocean of information, only then enter it. Top skills that can help are digital marketing, copywriting, sales, design & development. (in that order) Forget experience & strengths, Most people entering dropshipping don’t even have a clue about these critical skills. Most successful drop shippers are just talented, experienced & passionate Online Marketers.
2. Risk
It will take only a few VIRAL Fb posts that expose Aliexpress dropshipping & the entire thing can crash within days. Obviously, people want to save money. Why will they buy from an unknown XYZ store when the same thing is already available for a much cheaper price on Aliexpress & Amazon?
I even saw some Instagram posts that expose dropshipping stores. A person had a bad experience from a poor quality store. The post exposed the business model & pleaded people to buy directly from Aliexpress rather. This is the reason why dropshipping is uncertain. Nothing can be predicted for sure. Let’s say a TV tech show exploits the dropshipping business model. The videos go viral. What will you do? Anybody thinking of quitting 9-5 rat race should know that this is another rat race (a bit more uncertain one).
3. Competition
The competition has already become fierce. On google trends, the term dropshipping has even crossed affiliate marketing. This means higher Ad bids, Hence lower ROI. It was much more profitable 2-3 years ago.
4. Takes time, effort & money
If you think it’s a good way to earn fast cash, you are wrong. It’s neither fast nor easy if you do it properly. It requires quite a bit of cash flow for testing & optimizing ad copies. If you into it just for the money, please quit & get a stable job.
5. Niches
Every second person is selling accessories & fashion stuff. Hence the bids are too damn high. Old players are doing ok, but newbies are the ones to suffer. It’s very hard to sustain in this niche due to the ever-increasing competition & saturation.
6. Store Design
Brooklyn theme is being used by Most stores. Imagine a new website comes that looks more or less like Facebook. Will it not look like a scam?
7. Fake Shopify Gurus
Talking about YouTube dropshipping “gurus” – half of them are just scammers. They either show photoshopped images of their earnings or they just place the dummy orders themselves. Some of them just edit the HTML of the page. They make shit loads of money selling courses that are of questionable quality. Some of them are genuinely spending heftily on Fb ads. Their ROI from the store is negligible but they make a ton of money selling courses.
8. Competition with Amazon
Almost all the products that people dropship are already available on Amazon, that too on a cheaper price & super fast shipping along with COD option. On top of that, Amazon is trusted while a new e-commerce store is of questionable credibility.
9. No retention
The brick & mortar businesses have very high retention rates due to geographical constraints. People go to the shops near to their house. But online – If people find out some better, cheaper, faster & more trusted options – they make a switch. Higher costs, questionable quality, high delivery times are a few factors due to which the overall customer delight is very low & so is the retention.
10. Ad costs
Every new trend has an adaptation curve. Best time to invest in bitcoin was before 2014. Best time to start dropshipping was before 2016. What FB ads did using 5$ back then, is the same as 25$ today. Early birds are the one to enjoy & newbies are the one to suffer. Make sure to catch the next trend just on time.
11. No unique value / No Unique market fit
Before starting a new business – Everyone should consider Market fit & competitors. There is always some Marketspace for 3-5 competitors provided they provide some unique value. With Unique value comes a unique market fit.
But, there are 500k Shopify dropshipping stores. Also other 500k Woocommerce stores. Now that’s a really big number. Most of them sell the same low-quality Chinese products with no factor of competitive differentiation.
12. No entry barrier
An entry barrier can prevent copycat competition from entering the market, saturating the industry & destroying the margins. Why aren’t there too many companies producing processing chips like intel? The reason is simple: Entry barrier. The complexity of the product can be a big entry barrier itself. Very high R&D costs can be another entry barrier for the competition to jump in. For dropshipping, there is no such entry barrier. It is a very low investment business model, hence it’s highly competitive. On the top of that, copycats can easily copy the entire marketing strategy within no time. So there is no legal entry barrier either. (like patents, copyrights, etc)
Thanks for reading!
I would love to know your thoughts in the comments down below!
