Is dropshipping still worth it in 2024?
Logistics
Posted 28 Mar 2024
In today’s era, a vast array of products is accessible to us online, 24/7. With e-commerce sales of 79.7 billion euros in Germany by 2023, it is imperative to capitalize on the enormous potential of this sector. Dropshipping presents an excellent opportunity to do so. This article explains what dropshipping is and why it will remain profitable in 2024.
Classic dropshipping is a retail model where the retailer sells products through a third-party provider or supplier without having the goods in stock. When a customer orders a product, the retailer forwards the order and shipping details to the supplier, who then sends the product directly to the customer. The retailer acts as an intermediary and takes care of sales, marketing, and customer service. The purchase costs and actual sales price for the consumer often differ significantly. Retailer A, representing classic dropshipping, is one of the two types of retailers to consider.
Retailer A purchases gardening gloves for €2.35 from Aliexpress, a Chinese supplier, and resells them on its website for €20. This demonstrates the retailer’s competence and expertise in sourcing quality products at a competitive price. The product is shipped from China with the same delivery time and quality as if the customer ordered it directly from Aliexpress. Effective advertising can often lead to customers willingly paying a surcharge, as seen when the product is well advertised on social media. This fragment highlights the importance of advertising in achieving this outcome. Here you can read more about using social media platforms as marketing devices.
The retailer emphasizes that the product is delivered from their own country or has a short delivery time. However, this is not true: they often say that the long delivery times that occur are often attributed to logistical problems or an “error” on the part of the online shop when processing the order.
Now consider retailer B, who imports the products in large quantities to Germany, stores them here and ships them from there without a customer order. This variant symbolizes modern dropshipping, which eliminates delivery time problems. However, it should be noted that this method is also associated with a higher risk. Some Amazon and eBay retailers are known for this – also interesting to read: “Brand positioning: How to stand out from the crowd!”
Products come with a guarantee for the German market and responsive German-speaking customer support. This ensures that customers do not have to wait a long time for a product or deal with a retailer located thousands of kilometers away. Storing products in Germany and shipping them from there is attractive for many retailers, despite the higher storage and logistics costs. Choosing the right product is crucial, and conducting precise market analysis is essential. It is pointless to have a warehouse full of products that no one is interested in. This option carries a significant risk due to storage costs and paid-for products.
The dropshipping market is divided into two groups: Retailers who focus on high prices and long delivery times, and those who can offer added value through fast delivery and local customer service. To put it another way: With both variants, the effort involved is much less than developing a product yourself and the margins can be impressive.
Dropshipping will still be a worthwhile option in 2024. However, the choice of the best option depends on various factors.
The e-commerce market has experienced a huge upswing due to the pandemic and the demand for online shopping remains high. On the other hand, the market is saturated, and competition is fierce. Margins in dropshipping are highly dependent on customer satisfaction (returns and import taxes), and dependence on third-party providers can lead to challenges, for example when it comes to product quality or delivery times. If you are starting small, you should use the classic option, as this involves the least (financial) risk. No order means no storage costs and no expenditure on the product. As you gain more experience and a feel for the market, the modern option becomes more suitable, which can be particularly advantageous on marketplaces such as Amazon, as many people associate the plattform with quality and reliability.
To be successful in dropshipping, there are a few points to bear in mind:
1. Find a niche market: In a saturated market, specializing in a niche with less competition and a loyal customer base can be crucial.
2. Ensure quality: Working with trustworthy suppliers who deliver high-quality products is essential to avoid negative customer reviews. Especially as PayPal is quick to act if there are too many negative “PayPal buyer cases”.
3. Prioritize customer service: Excellent customer service that resolves issues quickly and efficiently can keep customers happy despite any delivery delays.
4. Marketing and branding: A strong brand and targeted marketing are essential to stand out from the competition and attract customers.
5. Optimize logistics: Warehouse considerations close to the target market can significantly reduce delivery times and increase customer satisfaction.
Finally, digitalization and automation of processes is another important aspect that enables dropshipping companies to operate more efficiently and achieve scaling. Technology solutions for inventory management, order fulfilment and customer relationship management can help reduce operational overheads and improve the customer experience.
Dropshipping is still a lucrative business opportunity in 2024, provided you have a well-thought-out strategy, clear positioning and a focus on quality and customer service. Investing in these areas and adapting to rapidly changing market dynamics is essential to secure a place in the highly competitive e-commerce landscape.
Junior Marketing Consultant at HBI Communication Helga Bailey GmbH
Jonas Albrecht has been supporting HBI in the areas of PR and marketing work since 2022.
As a Junior Marketing Consultant, his responsibilities include the conceptualisation of marketing campaigns, social media management and the creation of specialist articles. He also produces videos on YouTube as a hobby.
