Dropshipping has become a talking point in recent years, but is it still profitable as a business in 2022? This article looks at some key statistics in the eCommerce market to see if it really is worth your time.
Dropshipping is an eCommerce business model. It is popular for its low barriers to entry and low start-up costs. Dropshipping works by selling products online, however, the inventory is held by the supplier, who also processes the orders straight from their warehouse.
The process of dropshipping:
The Coronavirus pandemic boosted the eCommerce market, making what is predicted to be a long-lasting shift in online shopping behaviours. According to Statista, over two billion shoppers made a purchase online in 2020. Two years later, the value of the eCommerce market has increased and people are spending more time online.
A market forecast from Insider Intelligence estimates that eCommerce worldwide will be worth USD $1 trillion more in 2024 than in 2022.
They quote, "worldwide retail and retail eCommerce spending are expected to stabilise in 2022, after two years of unpredictable circumstances and unusual growth patterns. Even in a slower-growth environment, total new spending will be enormous."
By 2025, Statista predicts that eCommerce will take almost a 25% share of the total global retail sales. That's a nice share of the pie when also considering mobile commerce, physical retail stores, and omnichannel models (a mix of online and offline retail channels combined).
Lockdown and limited activities due to Coronavirus helped to double the amount of time people spent online during 2020. According to Statista, the average time online in 2019 was only 3 hours and 23 minutes per day. Since 2020, that figure soared to almost 7 hours per day.
Even after the global pandemic has reached the tail-end of its intensity, statistics still show that folks worldwide are still more connected to the internet than ever.
This figure reaches as high as 10 hours and 46 minutes online per day for South Africans, says research from Data Reportal. These statistics are only averages, so some will be spending even more time than this on the internet.
Reaching your target audience through digital advertising channels will be more successful with such high numbers of internet users. A mix of paid adverts, display advertising, influencer marketing, and organic search marketing are key areas for spending your dropshipping advertising budget.
For example, as of January 2022, the global average time spent on social media per day is 2 hours and 27 minutes. The statistics from Data Reportal show that social media takes a 35% share of people's time on the internet.
This makes social media one of the most popular online activities. More than 3.6 billion people used social media in 2020 worldwide. It is estimated by Statista that this will increase to around 4.4 billion by 2025.
The research shows that the top five ways that internet users find brands to make a purchase are from performing a search online, adverts on TV, word-of-mouth, adverts on social media, and product websites.
Advertising on search engines, creating paid ads on social media, and displaying adverts on websites are all accessible ways to increase traffic to a dropshipping website and boost sales.
Finally, a key reason that dropshipping stays profitable is the low start-up and running costs involved. With a traditional business start-up, entrepreneurs need to source financing to cover the high initial expenses of buying stock, renting warehouse space, and order-processing equipment. The dropshipping model, however, is streamlined in comparison. The only initial costs when starting are the subscription fee to a supplier, creating a website, internet connection, and a laptop to work from.
Even after a dropshipping business is established, further costs are still fairly low. Extra expenses might include hiring staff once the business has scaled, improving your website, advertising costs, and branding.
The statistics speak for themselves for those deciding to test the waters in eCommerce and dropshipping. As people become increasingly connected to the digital world, there is more opportunity to promote a brand to these larger audiences and make a profit. So to answer the question, is dropshipping still profitable in 2022? Yes, it is!
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