With the changing business dynamics, entrepreneurship is no longer limited to traditional domains that require people to practically trade goods and services. The advancement of technology has made it possible to run businesses that incorporate an extensive level of buying and selling, along with earning huge profits with the comfort of one's own home.
Dropshipping is a form of retail business whereby the seller accepts custom orders without inventory management. In the drop-shipping model, the business transfers the order directly to a wholesaler, another retailer, or fulfilment house, which directly ships the goods to customers. In this way, the seller does not have to handle the product directly. Gaining pace in the early 2000s, dropshipping has become a popular method on e-commerce platforms over the years.
Though it is controversial to say whether a drop shipping model is dead or alive in 2020, certain factors determine the profitability of it in 2021. Listed below are the top ten factors that will make it profitable in 2021:
If you are looking to expand your business in 2021, it might come to a halt due to prevailing economic conditions. While there are multiple other costs of internal or external growth, the cost of inventory management might predominantly be the highest of them.
Storage of inventory requires a warehouse, and with it comes the cost of maintaining and supervising these warehouses. The larger the business, the higher will be the need for warehouses and therefore, costs will be high.
On the contrary, the drop-shipping model eliminates such costs leaving a good profit margin for the intermediary. Despite the dynamic economic conditions in 2021, dropshipping might be profitable, unlike other retail businesses.
Keeping an inventory demands regular maintenance or else products might be damaged, leading to wastage. Such wastage will increase the costs of the business leading to lower profit margins available for the owners.
When it comes to the drop-shipping model, the intermediary does not have to bear such costs. Therefore, it is safe to say that drop shipping will be more profitable than storing products unless the demand for products is very high, which is very unlikely in 2021, considering the worldwide economic recession.
Pricing strategy is an essential part of the marketing strategy a business needs to design for its product to be successful.
Several variables are to be considered before setting prices. Since intermediaries have the majority of the control in the drop-shipping model, they will be able to set a price that suits their objectives and takes all the variables including the location of the customers and demand for products in 2021 into account. Henceforth, this will help intermediaries in securing a higher profit margin.
Customer loyalty can be defined as repeated purchases made by customers.
In a modernized era like 2021, customers will prefer personalized services offered by the intermediary alongside efficient aftersales services. Focusing on relationships with the customer will help intermediaries to earn a positive brand image for their drop shipping website. It will not only encourage customers to come back and make more purchases but will also expand the customer base as they might spread a positive word about the business.
This will lead to increased sales and eventually causing the intermediary to earn more profit.
If current demand levels are observed, it can be said that futuristic levels are highly uncertain. With high uncertainty levels, keeping an inventory might prove to be disadvantageous as demand might fall further due to the pandemic crisis. This could also lead to high storage of unsold inventory, which might cost highly to sellers. This can drastically impact profitability, and the business might run into losses or liquidity issues.
The drop-shipping model can aid in avoiding surplus or shortage in supply as intermediaries will have a backup dropship supplier to deal with changing demand levels. Other businesses can also use dropshipping as insurance against extreme circumstances. Needless to say, drop shipping will be profitable in 2021 due to such factors.
As the world deals with a pandemic crisis, it might not be safe to start a business with higher investments in 2021 as the risk of failure is relatively high. However, the drop-shipping model requires little investment due to various costs being excluded, e.g., warehouse costs and costs of inventory management, making it a risk worth taking.
Moreover, low start-up costs might lead to low overall costs, which will leave a good amount of profit for the intermediary even in the initial days after commencement of business operations.
The Dropshipping model permits the intermediary to sell a wide range of products with different demand levels. This means that if the demand for one product falls, the intermediary will have the option to start selling other products with comparatively higher demand. Consequently, the intermediary will not lose a large proportion of its sales.
Expandability refers to the ability of a business to grow its operations in multiple ways intermediaries can test out new products to measure the customer’s desirability for them without ordering them in bulk. In this way, the failure of a certain product will have no impact on the profitability of the business.
Along with this, the drop-shipping model can help in targeting different market segments at once, which will further aid in engaging existing customers and profitable operations of the business.
One of the prominent reasons for dropshipping is to prevent inventory distortion, which is the cost of out of stocks, lost sales, and overstocks. Through a supply chain such as that of the drop-shipping model, an intermediary can gain access to limitless inventory, which gives them the ground to explore and deal with an array of products. This might also benefit the customer as they now have a wide variety of goods to choose from
Handling, labelling, packing, and delivering is a time-consuming process. Increased time consumption might affect the productivity and efficiency of the business, along with the divided attention of the intermediary. The involvement of a third-party supplier who manages above stated matters can give an intermediary the time to focus on the growth of the business, which might prove to be profitable for the business in Longterm.
Now that we’ve considered the factors that might make dropshipping profitable in 2021, here is a list of the top ten dropshipping businesses that have been operating successfully throughout their operations and may continue to do so in 2021:
With a good reputation and a supportive community, dropshipping on ETSY has gained popularity in recent years. If drop shippers have been looking to sell modish products alongside sourcing out products. ETSY might be an appealing option. With 2.1 million sellers, ETSY can be considered a gold mine for quality products.
ETSY has a wide range of products to suit the buyer's choice. Looking for a handmade product, wedding product, or printable? They have them all. ETSY is one of the biggest websites for these niches.
Dropshipping on Amazon is one of the most recognizable methods sites with 310 million active users. It might seem intimidating at first, but once you are familiar with the rules of dropshipping on Amazon, it is a literal piece of cake.
Amazon offers a huge number of benefits to its suppliers; they have their warehouses and a large customer base. Aside from this, reaching customers is as easy as it can be helping the suppliers in reaching a new target audience.
If you are considering to dropship via Amazon, here are a few steps for doing so:
Firstly, choose an e-commerce platform, preferably Shopify, followed by the selection of the right products. Then you will have to create an Amazon seller account that will require approval. Once you have received the approval, create an account on Shopify, and you are good to go.
Shopify is a leading e-commerce platform with entrepreneurs selling products from all over the world. Dropshipping on Shopify is simple to use regardless of technical experience. Unlike typical e-commerce businesses, drop shippers at Shopify will not have to keep excess inventory, as their inventory management will be possible with just a few clicks.
To start dropshipping on Shopify, you will have to create and name an online Shopify store along with designing and optimizing the settings of it. Eventually, you will launch it to make your first sale.
With a growing trend of drop shipping, AliExpress remains one of the top dropshipping e-commerce platforms. Dropshipping on AliExpress is convenient with low-risk involvement for new drop shippers. Also, they have the freedom to set prices and their profit mark-ups.
Dropshipping on AliExpress requires setting up an online store, downloading an app to import products from AliExpress, and finally, placing an order with a supplier as soon as a customer purchases at your store.
SaleHoo is an outstanding platform for drop shippers. It can accommodate the entrepreneurs who are looking to expand their businesses but do not have the storage capacity for it.
To begin dropshipping on Salehoo, you will need to first sign up and connect your shop to Salehoo to gain access to the dropshipping tool. After this, you will have to select the products and add them to Shopify. So convenient, isn't it?
Spocket can be considered as an excellent choice for people who are new to dropshipping and are starting. It is a bulk price concept and comparatively less delivery time gives spocket a differential advantage. There are multiple other benefits of drop shipping in spocket:
Its products are quality tested and are shipped faster to customers in the UK and USA. Besides this, products can be resold at wholesale prices, and suppliers can add the shop logo, name, and a personal note by the drop shipper on the store invoice.
Thinking to start dropshipping on spocket? Here is what you can do: First, install the app and go to the settings to add your shop’s URL. Subsequently, import and customize your products, set up shipping, and start processing orders.
When it comes to buying and selling electronics, Mega goods are a good choice. Though it has a small inventory, it is a convenient option for drop shippers who are looking to deal with a single market.
To begin drop shipping at mega goods, to will need to create an account, add integration, and use their tools to customize the supplier’s product feed.
Wholesale2b is an amalgamation of more than 1 million products sold by 100s of suppliers. These products can be sold further on eBay, Amazon, BigCommerce, etc. Different apps and different pricing strategies are available for different platforms.
However, setting up on wholesale2B might be confusing and not be as straightforward as you would hope it to be.
Drop shipper is a general platform that has over 1,700 000 products from 890+ suppliers. Dropshipper.com has a diversified range of products, which include beauty products, electronics, jewellery, and much more. Nevertheless, joining dropshipper.com is not free. An amount of $29/per month has to be paid for joining in.
Like Dropshipper.com, sunrise wholesale is a general platform with a wide range of products. It carries over 1500 products in categories like décor, garden décor, sports and fitness, jewellery, and more. This platform can connect to eBay, Amazon, and Shopify.
Though sunrise wholesale has a low inventory and it charges a steep restocking fee, it has strong integration with the aforementioned platforms.
Given above are the top 10 platforms that can be considered for dropshipping. Amongst these, some are free while others are not. Spocket and AliExpress allow free sign up whereas SaleHoo charges $67/year, wholesale 2B charges $24.99/month, Amazon charges $0.99 for an individual plan and $39.99 for a professional plan, sunrise wholesale charges $99/year and ETSy charges a listing fee of 20 cents per list.
Conclusively, dropshipping might appear to be beneficial, but it certainly does have some negative aspects that are worth considering.