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Is dropshipping profitable? In this article, we analyse whether it is still possible to earn money through dropshipping, and what the keys are to doing so.
For those who don’t already know, dropshipping is a business model through which you sell online (via your own online store, Amazon, etc.) and your dropshipping supplier anonymously ships the product directly to the end customer.
You don’t have to invest in stock or warehouses or manage orders when dropshipping. Your only job is to sell and manage any communication with your customer, who will never know you didn’t make the shipment.
Dropshipping has grown exponentially over the past few years, so it is no surprise that many wonder if it is still profitable, or whether the market has become saturated.
Let’s take a closer look.
Analizziamolo.
Is dropshipping a saturated market?
No, the dropshipping market is not saturated. What is saturated is low-quality dropshipping, with Chinese suppliers, long shipping times and a poor shopping experience.
But there is another way to do dropshipping that continues to be profitable.
Proof that it is not saturated is found in the fact that it remains a clear trend in e-commerce. In fact, searches for “dropshipping” have not stopped growing in the last five years.
What is important is to break the association whereby dropshipping is linked to AliExpress or to Chinese suppliers and poor shopping experiences.
Dropshipping is often associated with the sale of small products of questionable quality with low profitability.
But this business model goes much further.
❌ THE MYTH: Dropshipping involves low-quality products, a poor shopping experience and low profitability.
✔️ THE REALITY: Dropshipping is just another business model. With the right supplier and strategy, it is possible to ensure profitability by selling quality products with fast shipments.
Each seller can define their own strategy.
For example: there is a clear tendency to specialise in what is known as “high-ticket dropshipping”: dropshipping more expensive – and often bulkier – products.
There are hundreds of similar examples.
There are no written rules as to what can and cannot be done.
Every year the message of “dropshipping is dead” is repeated. Every year it is proven to be a myth! Sellers find new ways to bypass saturated niches and keep generating profits.
How much money can you make with dropshipping?
Many “gurus” will tell you that if you start dropshipping today, in a week you can be turning over 10,000 euros per month.
We’d love to tell you it’s true, but we’d be lying.
Be wary of promises that sound too good to be true.
Dropshipping, like any other online sales model, requires investing time and effort.
Also, if you’re new to online selling, you’ll need to factor in a learning period. Just like anything else.
In the beginning, you might earn €100-200€, increasing your profits gradually, until you reach several thousand euros per month.
How to calculate your dropshipping margin
If you sell by dropshipping, your margin is the difference between the selling price to the end customer and your costs.
RETAIL PRICE – [Product Cost + Related Costs]
The related costs would be:
- If you sell in marketplaces, the commission per sale (around 15%)
- Transportation costs (unless charged separately)
- The costs of your search engine marketing campaigns.
- Any other costs you incur in selling your products
How to make dropshipping profitable?
As we mentioned, each seller has their own strategy.
And the best dropshippers know that it’s a process – involving a lot of trial and error and you’ll have to adapt your strategy constantly.
In addition, the price of the products and the margin they are able to generate change constantly.
Let’s look at this in more detail, because it’s important.
The market is very dynamic.
One day, a dropshipper may rule out a specific item because the price is very high and so it will not make a profit.
But that price may be due to a one-off cause: perhaps freight rates have gone up. Or there’s a shortage of chips.
In many cases, these problems are solved in a short time and the same product will then cost up to 5 times less.
What do we mean by this? If you don’t find the price you want on a particular day in your dropshipping supplier’s catalogue, it doesn’t mean you won’t find it in the future.
The important thing is to always be on the lookout for good opportunities.
At BigBuy, we have more than 400,000 products across all types of categories, so you can choose the most suitable for your business in order to try out and see which niche (or combination of niches) works best for you.
Register for free on our website to see the sales prices to distributors and calculate your margin.
That said, most dropshippers choose one of these strategies.
High sales volume/low margin
Products such as perfumes or televisions from recognised brands, are in high demand and sell well, but your margin is lower.
You will need to generate a high volume of sales to ensure profitability.
Low sales volume/high margin
You can also choose to sell products that generate a lower volume of sales, but leave you with a higher margin.
In the e-commerce sector, a good margin would be around 25-30%. At BigBuy, we offer products with a margin of up to 65 or 70%.
An example of this type of product would be gifts, such as InnovaGoods branded items.
And which one should you choose?
It isn’t a case of one option being good and the other bad. They are different models.
Expert tip: Combine categories to increase profitability
If you sell televisions, for example, your margin will be low. Therefore, it is a good option to include other products in your offer with higher margins.
Sell across different categories, and in different price ranges.
Thus, a customer might be looking for an LG TV (low margin), but also come across an e-robot from a lesser-known brand (high margin). This way, you can generate cross-selling, increasing the average ticket and your profitability.
What does BigBuy offer dropshippers?
At BigBuy, we’ve been working with dropshippers for over a decade.
We offer:
- More than 400,000 good quality products, in all types of categories. So you can choose your niche (or niches!)
- Fast shipping: your customer will receive their product in less than a week. Forget about delivery times of more than 21 days.
- Products with warranty. Good management of returns.
- Sync apps for Shopify, Amazon and many more online channels.
When working with BigBuy, you can:
- Sell only through dropshipping (in different channels)
- Combine dropshipping and other methods: if you already have an online store, you can expand your catalogue by adding BigBuy products. Depending on which product a customer buys, either you or we manage the shipment. The options are mutually compatible.
