Is Drop shipping still a good business in 2024?

The ever-changing global economy and market continually presents new ideas. However, some of the ancient practices that prevail continue, only growing with each passing year. Dropshipping is one such widely accepted and gradually growing best practice or business model that has proven to be profitable for many.

The business model began in the 1950s with telephone orders received by customers using catalogs. However, in the 1990s, people saw the growth of dropshipping with the internet boom making it easier for the trend to escalate. The newest dropshipping model comes from AliExpress, which was introduced in China and has been popular since 2006.

Although the model is relatively new and rediscovering the big names in the industry, such as Shopify and Amazon, people view dropshipping as a gradual decline. Additionally, it is also a common belief that the dropshipping market is becoming saturated. However, dropshipping is still relevant when done right, and with a little effort, it can make individuals profitable.

Statistics for dropshipping businesses

The increase in dropshippers was recently seen during the pandemic when people had more time and opportunities to focus on starting a dropshipping business. Due to the spread of the disease, people were hesitant to shop in-store and found it more convenient to order products online. Additionally, the business model is inexpensive and easy to follow, attracting many inexperienced people.

Is the dropshipping market saturated?

Market saturation is a common concern for people considering dropshipping as a side hustle. The number of drop shippers has indeed increased over the years.

However, with the ever-changing e-commerce landscape, many new drop shippers still have room to start a new scaling business.

Therefore, if you are worried about market saturation, there is no need. Yes, there is competition in the market. Yet some companies are more successful than others because of how they manage and scale their business.

Reasons for dropshipping failure

Dropshipping is a profitable business model in today’s ever-changing e-commerce landscape. However, unavoidable mistakes can set you up for failure, and it's not because of the market. Since dropshipping is a low-cost startup model, you may only be able to afford to fail if you learn.

Here are some of the most common reasons for failure in the dropshipping business:

Assume Dropshipping is an Effortless Business

You don't need in-house inventory to run a dropshipping business. Additionally, order fulfillment, inventory inventory management, and customer service are standard services offered by various dropshipping providers. Therefore, when an individual starts a drop shipping business, they assume that it is effortless and there is little or no work involved.

As a result, many dropshipping businesses fail because dropshippers sit back and run the business on autopilot. To avoid this mistake, check your business operations regularly and make sure everything is going well on your customer's side. If your services distress them, they will quickly look for another company to meet their consumer needs.

No capital resources

Dropshipping is considered a low-cost business because there is no inventory to store in a warehouse. Therefore, product cost and warehouse rent do not apply. However, assuming that you don't need any capital resources to start and scale your dropshipping business would be a mistake.

To ensure you have enough customers to make a profit, it is crucial to invest in good marketing. If your marketing strategy is cheap and doesn't address the key pain points of your ideal customer, your business won't attract customers and grow.

Late shipping

If your customers pay their dues and get products later than promised, it's a perfect recipe for dropshipping business failure. Your customers should receive the order before the scheduled date or at least when it is due to reach them. A delayed shipment can ruin your relationships with your customers, who will seek timely services from your competitors.

If such a case occurs and you are notified via an online review, do not let it sit and stew with more people. Instead, respond to it, apologize, and try to rectify the mistake. Also, ensure that the practice will not continue in the future by contacting your dropshipping supplier.

Messy website

Have you ever seen an e-commerce site where you couldn't find anything? How long did you stay on this site? You are gone in seconds. Your customers take this course of action when faced with a poor user interface.

Your website should be neat and easy to navigate. It should be attractive and all the necessary tabs should be accessible to customers. Otherwise, you might get diverse viewers that won't convert into sales.

The biggest problems drop shippers could face in 2024

While everything is done right, specific geopolitical and economic issues can affect consumer behavior, which can cause your dropshipping business sales to fluctuate However, preparing an action plan for these most common problems of 2023 can set you up for success or at least a less intense blow.

Advertising costs of Facebook and Google

Google Ads and Facebook are two robust platforms for easy and profitable marketing. The number of consumers you can reach using these two platforms can massively increase your sales. However, both platforms increase their advertising prices, making marketing slightly expensive.

The cost of advertising on Google Ads varies by industry. For e-commerce, the cost per click is $1.16, the lowest cost of any industry. Additionally, for every dollar spent on Google Ads, the return on investment or ROI is $8. Therefore, if you play the game well, this slightly higher initial investment will generate better profits.

For Facebook ads, the cost per click is $1.72. However, impressions also increased substantially to 34%. Therefore, although you will have to pay more, you will also increase your chances of winning more.

US-China trade dispute

The political situation between the United States and China has made many drop shippers skeptical about their company's operations. However, there is nothing to worry about for drop shippers who do not order items in bulk. Additionally, major trade organizations will likely face problems as the trade war will affect imports.

High-end products, such as electronics ordered in bulk, may experience some issues. However, there won't be much of a bump for smaller, cheaper products ordered on demand. Additionally, the dispute is gradually easing and the restrictions imposed may not materialize in 2024.

Global economic recession

The global economic recession will likely lead to significant changes in 2024. These changes will also affect consumer behavior. Therefore, dropshipping businesses need to be proactive and prepare a plan to tackle the problem head-on.

Here are some tips to ensure you make profits even when economic conditions are not stable around the world:

Understand the consumption behavior of your ideal buyer. If you can identify the challenges they will likely face, you will be able to better solve them. Introducing discount programs or another product that your customers will need during a recession can increase your sales.

Save on business operations by budgeting and outsourcing. You can request third-party BPO (Business Process Outsourcing) services to reduce costs on your team and internal resources. Additionally, FPO service provider companies can also take care of your financial operations to help you allocate your budget.

Cutting back on marketing is not a wise decision. Many companies could take this step. So, take the counter-approach and aim to become the brand that customers remember first and foremost. Leave a positive impression of your brand on your ideal customer's brain through marketing, and sales will follow.