I am a part-time dropshipper, so I get this type of question from people I know all the time. And while I always say dropshipping is profitable, I rarely go into the details.
Today, I want to explain everything about what makes dropshipping profitable. And I hope this guide clears your doubts about starting a dropshipping business.
Here’s what you’ll learn:
- If dropshipping is worth it in 2022
- What is dropshipping & how it works
- Advantages of dropshipping
- Downsides of dropshipping
- If dropshipping is worth it all over the world
- Types of dropshipping
- Dropshipping on the Facebook Marketplace
- Dropshipping vs. affiliate marketing
- The biggest challenges of dropshipping
- If dropshipping is worth it for retailers
- If dropshipping is worth it for vendors
- The startup capital you need for dropshipping
If dropshipping is actually profitable
- How has dropshipping evolved
Let’s get started.
- Dropshipping is still profitable and legal in 2022.
- Dropshipping is worth it in most countries around the globe.
- There are many types of dropshipping and their profitability tends to vary.
- Dropshipping has a higher earning potential than affiliate marketing.
- You can start a dropshipping business for around $100.
- Interest in dropshipping is at an all-time high.
Is dropshipping worth it in 2022?
Yes, dropshipping is still an excellent choice for building a profitable business.
Compared to traditional eCommerce, dropshipping allows you to save on storage and fulfillment.
This means you don't need to factor in these costs when pricing your products.
So, dropshipping allows you to keep a higher margin, making it a lucrative business.
But dropshipping doesn't offer a guarantee that it'll make you a profit.
Profitability depends on the suppliers, products, and tools you choose for your business.
What is dropshipping & How does it work?
Some people have questions about dropshipping, but don't exactly understand how it works. So, I’ll start from there.
Dropshipping is a business model in which you don't store or deliver the products you sell.
Instead, you partner with a supplier who keeps the inventory and ships goods to the customer.
You are responsible for creating an online store and making sales for your business.
Other duties may include marketing and customer service.
Dropshipping differs from other business types where you buy and manage the inventory.
In this case, suppliers are the ones in charge of inventory and order fulfillment.
Here's a picture demonstrating how dropshipping works:
As you can see, dropshipping offers hands-off fulfillment to the merchant.
Once you get an order, the supplier will ship the product to your customer. You don't ever need to touch or manage the goods.
Advantages of dropshipping
I find dropshipping to be a great option for new business owners to start making money online.
During my early entrepreneurial days, I was researching different business models every week.
And dropshipping caught my eye because it offers:
- Low barrier to entry. You don’t need a lot of money to start a dropshipping business. That’s because there’s no need to buy or store inventory.
- Flexibility. Test as many dropshipping products as you want. It’s a flexible business model, allowing you to add or remove products based on their performance.
- A broad range. Dropshipping lets you offer a wide selection of products. Since you don't need to buy inventory, you can diversify and expand on your offerings.
Downsides of dropshipping
Dropshipping as a business model also has a few drawbacks. I found this out six months into running my online store. Here are the key disadvantages:
- Supplier dependence. With dropshipping, you are reliant on your supplier's inventory. If they face a stock shortage, you face a stock shortage.
- Lack of control. Since you are not making the products yourself, you don't have control over their quality.
- High competition. Because of the low barrier to entry, many would-be entrepreneurs want in on the action. This can increase competition in the marketplace.
Is dropshipping worth it all over the world?
You can start a dropshipping business in most countries worldwide.
But the question of is dropshipping worth it might change depending on where you live.
Let's take a look at some of the larger countries and whether it makes sense to engage in dropshipping there.
Is dropshipping worth it in the US?
You bet it is.
The US has a thriving eCommerce market with many people buying online on a regular basis.
And many dropshippers have established warehouses in the US.
So if you start a dropshipping business there, you should be able to make a profit with the right strategies.
Is dropshipping worth it in Australia?
Dropshipping is worth it in Australia for many reasons.
For one, the average cost per order from fulfillment companies there is $5.
Low fulfillment costs means you can keep a higher margin on your products.
Is dropshipping worth it in Canada?
Dropshipping in Canada is a profitable, yet competitive field.
To set yourself up for success, focus on searching for products with potential.
And suppliers with a track-record of serving the Canadian market.
Is dropshipping worth it in Europe?
Yes, dropshipping is a profitable business to pursue in Europe.
The business model offers a low-cost route to the vast European eCommerce market.
You can sell in various EU countries while keeping your fulfillment costs low.
Is dropshipping worth it in the UK?
Dropshipping can be a very profitable business in the UK.
That's because UK consumers are the world's biggest online spenders.
Of course, you'll need to be creative with your branding to make them notice your business.
Is dropshipping worth it in India?
Dropshipping is the most profitable eCommerce business in India.
With dropshipping, you can sell trendy products to Indian consumers at a low cost.
The country's growing eCommerce market means you'll get consistent opportunities to make sales.
Types of dropshipping
There are many kinds of dropshipping, but not all are equal when it comes to profitability.
For example, Amazon dropshipping gives a different profit than Shopify dropshipping. That’s because Amazon takes a cut from your revenue.
Below, I’ll break down the most popular dropshipping types to help you learn which ones are the best to pursue.
Is Amazon dropshipping profitable?
Amazon dropshipping can be profitable.
Amazon takes around 15% of what you charge for a product, plus shipping, on average.
Additionally, you pay a $39.99/month subscription fee or a $0.99 per-item fee depending on your Amazon seller plan.
If your profit margin is above all these fees, you’ll earn a profit.
Let’s say you apply a 30% margin on a product. After selling it via Amazon, you’ll have a net margin of 15%.
Even though this might not be high, you can make good profits by selling more products faster. Amazon dropshipping gives you access to a large customer base, so you can sell a higher volume of goods.
Is Shopify dropshipping profitable?
Shopify dropshipping is profitable, provided you pursue it the right way.
This means selling products with potential and partnering with credible suppliers.
Plus, make sure to build a unique brand because that's what will set you apart from other sellers.
From my own experience, I can say Shopify dropshipping has a better ROI than other models.
Shopify doesn't take a cut from your sales. And its in-house payment service lets you process transactions without charging extra fees.
So you get to keep a higher margin when dropshipping via Shopify.
Is Ebay dropshipping worth it?
eBay dropshipping is lucrative for entrepreneurs trying to make money on the side.
With a bit of work, you can open an eBay storefront and reach thousands of potential customers.
But eBay charges a listing fee and takes up to 10% of the total sale price.
This means you’ll need to leave enough room between your product's cost and sale price to earn a healthy profit.
Is Alibaba dropshipping worth it?
Well, it depends.
Alibaba works on a wholesale model, so you’ll need to sell products in bulk.
And selling in bulk means buying in bulk.
So Alibaba dropshipping is worth it only if you have the capital for bulk purchases. Plus, prepare to spend a few thousands upfront as Alibaba’s seller plans start from $1,999/year.
Is AliExpress dropshipping worth it?
AliExpress dropshipping is worth it for entrepreneurs without a lot of capital.
AliExpress lets you sell on a retail basis, so you don't need to source items in bulk.
Plus, you get plenty of marketing tools to help you succeed as a seller. This lowers your cost as you don't have to buy separate tools for promotion and campaign building.
Note that AliExpress charges a 5% to 8% commission fee on each sales transaction. This is lower than Amazon's fee and almost on par with eBay’s.
Dropshipping on the Facebook Marketplace
The Facebook Marketplace isn't as saturated as some of the other platforms.
Plus, it has a built-in audience and doesn't charge high seller fees.
Facebook takes 5% of the sale price of products over $8 and $0.40 for products below $8.
Note that the Facebook Marketplace uses local filters for user search results.
So you'll likely see listings from your own area or community. You can change this by selecting the place where you want to dropship.
Dropshipping vs. Affiliate marketing: Which is more profitable?
As eCommerce business models, both dropshipping and affiliate marketing are quite attractive.
But which is more profitable for entrepreneurs depends on many factors.
The main factor I look at is earning potential.
Dropshipping has a higher earning potential since you can decide the selling price.
With affiliate marketing, you have to work with a fixed commission.
So you might make $1000 in sales but only earn $50 because your affiliate partner offers a 5% commission.
In contrast, dropshipping products worth $1000 will likely earn you a higher profit. Even if the products cost you $500, you'll still earn 10x more than an affiliate marketer.
What are the biggest challenges of dropshipping?
Dropshipping might sound easy on paper. But in practice it has challenges that you should consider upfront.
Some of the biggest challenges of the dropshipping business model are:
No quality control
Dropshipping prevents you from checking products to ensure quality before customers receive them.
This means you can't address shortcomings upfront and have to take the blame if any issues arise.
The way to avoid this is to work with credible suppliers who focus on product quality.
Shipping can become costly when you add products from different suppliers
For example, a customer may place an order that includes products from five suppliers.
In this case, you'll have to pay separate shipping to five suppliers to fulfill only one order.
I faced this challenge during the early stages of my dropshipping journey.
As my shipping costs increased, I realized it's best to use a few suppliers that offer a range of goods for my store.
Returns are a normal part of running an eCommerce business.
But for a dropshipping entrepreneur, returns can bring complicatiorrns.
Your supplier may refuse to take products back, or ask you to pay for return shipping.
You could avoid this scenario by discussing returns with your suppliers upfront.
Many dropshipping suppliers will agree to handle returns if any arise. But it's better to confirm this upfront than to face complications later.
Is dropshipping worth it for retailers?
Dropshipping can be worthwhile for retailers.
The method allows you to sell products across the globe while keeping your costs low.
But the high competition can make it seem hardly worth the effort.
To make it a logical and wise investment, focus on things that can help you stand out in the marketplace.
For example, you can curate a product assortment based on country of origin, quality, and style.
People who visit your website are likely to find the assortment handy and refer you to their circles.
For inspiration on product assortment, check out the catalogs of brands like Twig.
Is dropshipping worth it for vendors?
Vendors are in business to make a profit, so dropshipping also needs to make sense for them.
And it can, if they partner with various retailers that sell products fast.
Vendors who do this can move more inventory faster and test new products.
Dropshipping products for many retailers is more beneficial and sustainable. It removes the need to secure large-scale orders from a limited number of merchants.
Plus, vendors get to diversify their client base and meet their sales goals with fewer orders.
How much startup capital do you need to start dropshipping in 2022?
I can't give an exact figure because there are so many factors at play.
But I can give you a rough breakdown of how much it generally costs to start a dropshipping business.
So you roughly need $100 to get started with dropshipping.
But expect this figure to rise as you add in things like Facebook advertising to your strategy.
Is dropshipping profitable?
I'll be honest. Dropshipping is profitable so long as you choose the right products to sell at the right price.
This can be tricky for a new entrepreneur, which is why I recommend using software like Dropship (even thought I’m a bit biased).
With Dropship, you can use data to find winning products and reduce the risk of choosing poor items.
Selling winning products is key to finding success in the dropshipping field.
How much can you make dropshipping?
There's no ceiling on how much you can make dropshipping.
But the average dropshipping income should give you an idea of what to expect when you do this business.
Most dropshippers earn between 10% and 20% profit from each sale or between $1,000 and $5,000 per month
There are exceptions of course. Your margins will be higher if:
1. You're in a less competitive niche.
2. You partner with a manufacturer.
3. You sell in-demand products.
How has dropshipping evolved?
Dropshipping today is different than it was many years ago.
In its early days, dropshipping made a lot of people high profits.
Because those who adopted it at the time became more competitive.
Then, saturation took over as more people discovered the benefits of dropshipping.
And the business model lost some of its touch.
The keyword being "some."
You can still make a lot of money from dropshipping today. But you'll need to use the latest tools and strategies, plus come in with the right mindset.
Don't look at it as a crazy, get-quick-rich kind of business. Rather, treat dropshipping as a long-term business, and you will find more success with it.
Is dropshipping worth it FAQ?
Here are some common questions regarding if dropshipping is worth it.
Is dropshipping good for beginners?
Dropshipping is a great option for first-time entrepreneurs. It allows you to sell products without requiring you to own or pay for them upfront. This makes it a low-cost, low-risk business.
Is dropshipping dead?
Dropshipping is far from dead in 2022. In fact, interest in dropshipping is at an all-time high as per data from Google Trends.
But dropshipping methods that worked several years ago are dead.
To find success with dropshipping, make sure to use the latest strategies and tools.
Is dropshipping legal?
Yes, dropshipping is legal. It’s a legitimate order fulfillment method that many retailers use worldwide. But you should be careful when choosing a supplier.
Some dropshipping suppliers sell products that violate other companies’ intellectual property. An example of this is a vendor selling footwear with Nike’s swoosh logo.
Always do your research before finalizing terms with a supplier. I ask to see official documentation, such as a distributor license. This helps me filter out suppliers who could cause legal issues for my business.
Is dropshipping still worth it? You should now be able to answer this question better than anyone else.
Dropshipping can be a profitable business. But you must be willing to put in the work and learn new strategies to find success.
Expect to earn $100-$500 in the first few months of running your venture. Then, once you gain recognition and experience, you should be able to make more income.
Ready to take your first step in the dropshipping world? Start by finding winning products via dropship.io.
Also, visit our blog for more tips and insights on how to manage a dropshipping business.