Dropshipping is the practice of selling products that are shipped directly from the manufacturer, distributor, or supplier to the end customer. Rather than hold inventory in a factory or warehouse, dropshippers simply connect customer orders to suppliers for fulfillment, while the seller collects the difference between the product’s sale price and its wholesale price.
Dropshipping is more popular now than ever due to the growth of ecommerce and low barriers of entry for anyone who wants to sell products online. Programs like Fulfillment by Amazon (FBA) utilize dropshipping to allow practically anyone to sell products in their marketplace for a fee. Independent sellers, major online stores, and even giants like Amazon use dropshipping in some capacity.
Dropshipping is especially appealing for independent sellers who are just starting out. Without having to worry about storage costs or shipping hassles, practically anyone can sell to millions of people online. But dropshipping is a risky business, and it’s not for everyone. These statistics will help you better understand the dropshipping industry so you can navigate a potential future in it.
Dropshipping is a massive business, due in large part to the exponential growth of ecommerce in the past decade. Although major retailers like Amazon and eBay make up a large part of that market value, there are still big pieces of the pie available for smaller dropshippers. [1]
The market is enormous now, but dropshipping has an expected compound annual growth rate (CAGR) of 28.8%, making it a potentially $130 billion industry in the next five years. [1]
A third of online stores use dropshipping. This includes companies like Amazon and Wayfair that have their own fulfillment operations in addition to dropshipping strategies. Many major online retailers began as dropshipping companies, growing to the point where they could support their own fulfillment operations. [2]
While a third of online stores use dropshipping, nearly a quarter of all online sales are fulfilled by dropshipping. The 77% of sales that are not fulfilled by dropshipping are primarily driven by industry giants with the resources to handle their own fulfillment efficiently. [2]
Electronics are the most commonly dropshipped good. Toys and hobbies are second, fashion is third, while furniture and appliances are fourth. [1]
Dropshipping isn’t just a viable strategy for ecommerce sellers; it also has benefits for manufacturers. By making their inventory available to any seller, manufacturers broaden their market, allowing more than just traditional retailers to sell their products. [3]
Research shows that retailers can be up to 50% more profitable by simply implementing dropshipping. Of course, there are many other factors impacting profit, but by reducing overhead costs through dropshipping strategies, retailers may have a higher profit potential. [2]
It’s no secret that consumers want options. But wanting to be able to make their own choices doesn’t simply apply to product selection. All other things being equal, two-thirds of consumers will choose a competitor with multiple shipping options over one with only one shipping choice. That’s why it’s important for dropshippers to offer different shipping tiers and options like free shipping. [4]
Starting a dropshipping business isn’t easy, and the most important step is also the most difficult. Nearly all ecommerce retailers say finding a good supplier is their toughest challenge. A good supplier is reliable, affordable, and flexible, but many suppliers are not inclined to work with you when they’re used to doing things a certain way. [2]
Considering the challenges of finding a good supplier and customers, dropshipping is far from a get-rich-quick industry. Very few dropshippers are profitable in their first year; so if you’re going into this business, you should be prepared to lose money for at least a year. [5]
Dropshipping is a popular fulfillment method that makes it much easier and more budget-friendly for ecommerce retailers to ship orders to customers. While many major retailers utilize dropshipping to cut storage costs, dropshipping also lowers the barriers of entry to the ecommerce industry. Anybody can sell products online by leveraging the dropshipping industry. However, it’s a competitive business and exceedingly difficult to carve out a niche. If you are considering starting a dropshipping business, be ready for a lengthy, uphill battle to find a great supplier and to turn a profit.