Dropshipping is a quick and easy way to set up a new ecommerce business with limited overhead and low initial investment. As such, its popularity is booming, and more and more sellers are entering the marketplace. The dropshipping industry is expected to be worth $557.9 billion by 2025.
However, the low barrier to entry does have a downside. Multiple dropshippers can all sell the same product, and that increases competition in an already competitive market.
As a dropshipper, how do you avoid being undercut by the competition and losing sales? Or avoid slashing your profit margin to remain relevant? In this post, we’ll explore this business model and ways that dropshippers can outperform rivals to come out on top.
Is dropshipping profitable?
Dropshipping is absolutely profitable in 2023. About a third of all online sales are fulfilled by dropshippers, including sales made on Amazon. That shows that it is a profitable way to build your online store and that dropshipping is indeed worth it. Dropshipping builds bridges between online stores and manufacturers and suppliers. Store owners don’t have to worry about handling inventory, shipping, or returns. And suppliers can tap into new markets and sell at higher margins by cutting out bulk buyers. It will most likely take one full year of hard work to build a steady and reliable income, but it can be well worth the time.
These simple tricks will make your dropshipping store more profitable:
- Partner with suppliers that compliment your brand.
- Experience the products you sell in-person as much as possible. This could look like meeting your supplier in person to scope things out before teaming with them.
- Create a professional online presence.
- Interact with your customers. Be transparent about the buying process, including shipping times, and build relationships to keep them coming back.
Be creative to find the best ways to connect with quality suppliers.
In case you haven’t guessed, everyone at Norton Shopping Guarantee loves dropshipping! Dropshipping has helped to take the ecommerce industry in exciting new directions. But that doesn’t mean all dropshippers will be successful. In order to stand out from the crowd, you should be aware of the pros and cons to dropshipping.
Advantages of dropshipping
As we mentioned before, starting a dropshipping business has many benefits. Some are obvious, but others aren’t. Let’s dive deeper into benefits you can use to your advantage.
Low cost
Dropshipping can begin with a laptop at the kitchen table. Not much is required to invest in inventory to be sold. The cost of keeping the business running is extremely low compared to a brick-and-mortar model. Dropshippers do not pay start-up, shipping, or production costs, which allows for more spending to build your online store.
Flexibility
It’s easy to scale your business as desired as a dropshipper. Sell the amount of products you’d like, and manage the number of suppliers you’d prefer. Since you are your own boss, you make the decisions of when, where, and how much you work.
Product selection
Since you are virtually creating your own store using the suppliers you choose, it is easy to diversify the types of products you sell. This makes it easy to test which products sell the best, which products don’t sell well, and change things up accordingly.
Before starting up your dropshipping store today, take a minute to read up on the disadvantages of dropshipping.
Disadvantages of dropshipping
While dropshipping is successful throughout the world for several reasons, It is important to mention a few disadvantages that may affect you if you don’t play your cards right. You should know and understand these disadvantages so you can avoid them as you navigate the road to success in the industry. The following is a list of the most common concerns associated with dropshipping.
Managing suppliers
Working with suppliers is one of the most difficult hurdles to overcome as a dropshipper. Because of the nature of this business model, you will most likely be using multiple suppliers at once in order to make the best pricing and quality choices. This means you will also be juggling multiple contacts, inventories, and strategies at the same time. This can be tricky if not managed correctly and can potentially harm your business.
Profitability changes when you increase the price or when you decrease the production cost of the products being sold. Because dropshippers only have control over the pricing of the product — not the production cost of the product — it is crucial to choose the best suppliers that allow you to still profit from dropshipping.
Less quality control
You can have a 5-star dropshipping store, but if your customers are dissatisfied with the quality of the product, this could be the end. Because you are not the supplier of the products you market, you have no control over the quality of the product your supplier offers. Dropshipping does not allow you to see each product you sell to your merchants. Product customization and quality is in the hands of the suppliers. For this reason, it is crucial to be very selective about the suppliers you work with, ensuring you trust their brand and the product they offer.
Competitiveness
How easy is dropshipping? It is easy enough for just about anyone to start an online dropshipping company with minimal upfront costs. For this reason, the competition is steep. In fact, the dropshipping market is expected to grow by an average of 23.4% annually from 2023 to 2030 according to a report from Grand View Research. The high level of competition can be combated by making strategic marketing plans and putting in the necessary time and effort into making it successful. This will lead you to success.
Shipping delays
In 2023, customers expect fast shipping. As a dropshipper, the delivery speed is out of your control. It has been shown that slower shipping rates equate to less traffic to the website, and less traffic to your products. This can be remedied by good communication and partnering with companies you trust.
Ways to Make Your Business Stand Out
Building a successful dropshipping store is all about breaking the mold. You can make your ecommerce storefront stand out in many ways, even when other dropshippers are selling the same products as you. Here, we present some of the best, tried and tested ways of building a successful dropshipping site.
Know your audience
The most important thing when building a dropshipping site is to know your audience. Choose a niche and focus tightly on your ideal customers, even if your products have universal appeal. Trying to cater to everybody usually results in a site that caters to nobody. So define your audience, consider their needs and concerns, and build your dropshipping site to speak directly to them. It might seem strange to turn away potential customers, but finding a niche is a proven business strategy that really works.
Tap into social proof
Social proof is also vital for dropshippers. As a consumer, you want to know that the site you are buying from is trustworthy. This is especially true if you want to purchase a specific product but find several sites selling it. While many customers will rank price high in their consideration of which store to buy from, that isn’t the only factor. You want to be sure that your money is safe, the product you order will arrive, and that it will match your expectations based on the listing you viewed.
Social proof helps build brand trust by sharing the experience of other buyers. This demonstrates to first-time purchases that the store is legitimate and the products are authentic. That type of proof is invaluable for a dropshipper looking to get ahead of the competition. Encourage your buyers to leave honest reviews, including photos and videos of the products they received.
Consider including these other examples of social proof on your website:
- Influencer endorsements
- User testimonials
- Sales statistics
- “People also bought” product links
- Bestseller lists
- Trust badges
The key to outperforming competitors is in social proof. The more evidence you have to show your store is legitimate, the more buyers will trust you. Successful stores use social proof to avoid the race to the bottom. This protects your profit margins because you don't have to slash prices to make sales.
RELATED: Why Social Proof is Important for Ecommerce Brands in 2021 and Beyond
Use unique product descriptions
If you’re building a large dropshipping store, it’s tempting to rely on the original product descriptions. However, this can create problems for your store and your customers. Search engines penalize duplicate content, so using large amounts of copied content could result in your store being downgraded on search engine results pages. Additionally, it clues customers in that they can find the same product elsewhere, potentially for cheaper.
Taking the time to create unique, compelling product descriptions is a valuable way of boosting your site’s SEO and making your products more appealing to your customers. Remember, it’s best practice to tailor your site to specific buyers. Unique product descriptions are an important way of speaking directly to your target audience and convincing them to make a purchase.
Always provide great customer service
What turned Amazon from a small online bookstore to the retail giant it is today? Exceptional customer service. Consumers know that when they purchase products from Amazon, they’ll have a great experience. Every retailer will have to deal with dissatisfied consumers at some point, but you can turn a negative experience into an opportunity to make a customer for life.
This short list touches on a few ways dropshippers can offer great customer service:
- Make it easy for customers to contact you with questions about your products or their orders.
- Be timely when responding to customers — it’s better to create one point of contact and monitor it regularly than try to be available everywhere.
- Keep your returns and refunds policy fair and transparent.
- Don’t sweat the small stuff — a shipping delay might not be your fault, but take it up with the carrier, not the customer.
- Consider using coupons and store credit as a way to build goodwill and encourage repeat business if a customer has a complaint
"Every retailer will have to deal with dissatisfied consumers at some point, but you can turn a negative experience into an opportunity to make a customer for life."
Final thoughts
Dropshipping has grown in popularity over the past five years, and many merchants wonder if dropshipping is still worth it. However, you can make your business stand out in many ways, even against other dropshippers selling the same products. Customer reviews, product images, purchase history, and bestseller lists are all powerful examples of social proof that drives sales.
Outperforming the competition doesn’t have to mean slashing profit margins to undercut other sellers at your own expense. Smart dropshippers know that building brand trust through social proof is the best way to grow a profitable and successful business.
Norton Shopping Guarantee’s trustmarks provide additional buyer projections, backed by a trusted third party. The Norton Shopping Guarantee reassures customers that their personal information is protected, their purchase is secured, and they’ll only ever pay the best price for the products they order. It’s the best way to make your business stand out from the pack and outperform your competition.
Want to learn how Norton Shopping Guarantee can help increase your dropshipping sales? Schedule a demo with our team.
