Do dropshippers make money?
There’s no doubt that dropshippers globally are making money. Whether or not the average Joe is one of them however, is a different matter.
Dropshipping can be incredibly lucrative and successful, but it is a highly competitive market and only the best seem to reap any real benefits. According to Shopify, top dropshippers from around the web estimate that only between 10% and 20% of dropshipping businesses actually succeed.
A lot of your success will depend on scale and time.
Scaling takes a keen eye to know what products will be profitable and potentially push them further with advertising, as well as making sure your supplier can actually deal with larger demands and orders in the case of a particularly popular product.
Time is involved to potentially build a brand around what you sell in order to build trust and familiarity, and to ensure that customers have loyalty to your store in particular instead of the thousands of other dropshipping stores out there.
A lot of people go into dropshipping thinking it will be a ‘get rich quick’ scheme, when that is definitely not the case, so they don’t put enough effort into these two crucial aspects. The industry is certainly not without its fair share of failures.
Zeky Ahmed of Zeky Enterprises, Inc. spent 2 years dropshipping before he closed down his e-commerce business and switched to affiliate marketing and selling digital information-based products.
“I tried dropshipping back in 2016 and spent a good two years trying to build that business. It didn’t work out and ultimately I had to shut it down, losing a lot of money in the process, because I ended up running out of the cash I needed to keep running ads to my store.
I’d say dropshipping can definitely be worth it if you know what you’re doing or have someone reliable who can show you the ropes…. I have friends that are currently making a lot of money doing it. But for most beginners, they SEVERELY underestimate how challenging it is. You need to have a big enough budget of at least a few thousand bucks to test your products, marketing and everything else until you finally get profitable.”
What kind of profit can you make?
The average dropshipper in the UK in 2022 makes around £2000 a month, but there is no limit to how much you can earn. People like Irwin Dominguez from San Diego for example, is a fast growing and high-earning dropshipper who made $1,000,000 in profit within 8 months.
The niche you choose has an impact, as some are much more profitable than others. The most crowded and profitable niches are in the Gadgets, Devices, and Accessories Niche according to Alidropship, with 18.5% of all dropshippers catering to the high demand for new trending technology.
A higher price point too would decrease the amount you’d have to sell, and that would also have an impact in gaining more profit.
As an example of the type of profit you could make: if you sold 25 phone cases a month at £80 and deducted the supplier’s wholesale price of £20, that would put you in the market of the average dropshipper’s profit range – a potential earning of £18,000 in a year.
You can make a rough estimate based on a 20% margin and 2% conversion rate but you need to factor into your profit calculation your discount from wholesalers might less than 20%, other expenses and competitors undercutting you at this profit margin.
It’s important to show discernment when researching stats online before you compare yourself against anyone in the dropshipping industry however, or get too starstruck by the larger numbers.
Smaller dropshippers and people wanting to sell online courses will often embellish and promise huge numbers as their sales strategy with no viable evidence that they can provide this for you – while the larger dropshippers are actually generally more private about their exact earnings since they don’t feel the need to boast – so the figures are vast and hard to get a truly accurate read globally.
Can you lose money?
If you haven’t prepared with as much knowledge as you can, especially in the beginning, then yes there is the potential to almost certainly lose money. As mentioned above, a common mistake most new dropshippers make is failing to choose a good niche.
Other ways you might lose money include needing to purchase your own products at least once to test quality, see how fast they are delivered, and that your supplier is reliable. You may need to verify your business with your online banking providers before any influxes of huge profits lead to your account being flagged for suspicious activity. These are two examples illustrating the multiple, most common setbacks that can occur rapidly for newer dropshippers.
Aaron Agius, Managing Director & Co-Founder of Louder Online shares:
“As far as numbers are concerned, I can’t say dropshipping is the same it was 5 years ago. It’s a highly competitive market with low-profit margins, low supply chain control, and legal liabilities. It’s also harder to build a lasting brand through dropshipping than it was before. All things considered, dropshipping is still a viable business option IF you can meet the right conditions.”
While the uncertain dropshipping atmosphere rages on, there are some people who advise to avoid it altogether and still swear by older and more tried-and-true methods.
Rick Hoskins, founder of Filter King is one of them. He states:
“Dropshipping is not a good long-term strategy. You’re leaving a tremendous amount of money on the table by not owning your own inventory and logistics processes. This could be the difference between a profitable business and a time consuming hobby.”
