Oversaturated or Viable? Inside The World of Dropshipping Written by Harry Chen ‘22
W
ith the advent of the inter-
a Compound Annual Growth Rate (CAGR) of 28.8% from
net and the popularization of
2019 to 2025. The market seems to be largely untapped,
smartphones, commerce has
and with the perceived ease and flexibility of dropship-
been completely revolution-
ping, many have turned to dropshipping as a get-rich-
ized. While brick-and-mortar
quick scheme on the side. The idea that anyone can
businesses still have a place in
start an online store for no cost and quickly be making
today’s economy, the rise of Big-Tech companies such
enough in passive income to pay the rent is intriguing
as Amazon and eBay are a testament to the profitability
indeed, but does this idea have some truth to it? Well,
and power of e-commerce. Consumers can now make
the answer is yes… but no.
purchases worldwide in a matter of seconds, without
Dropshipping can be highly lucrative—that is
ever stepping foot in
true. But is it easy? Not
a store or physically
necessarily. For starters,
making a transaction.
while the potential for
The unprecedented ac-
dropshipping seems to
cessibility and sky-high
be limitless, in reality,
ceiling for e-commerce
the market often feels
have led many to turn
crowded and oversatu-
to dropshipping. Drop-
rated. It can be hard to
shipping is a popular
find a profitable niche
business model for
to capitalize on because
e-commerce that allows
of the sheer number of
businesses to sell prod-
people looking at drop
ucts without keeping
shipping as a quick and
inventory or worrying
easy source of passive
about order fulfillment. For example, say you’ve
income. Furthermore, SZIHL Warehouse. Image from SZIHL. https://www.szihl.com/en/business/logistic_service.php
like every other business
found a supplier for an intriguing product. The product
model, dropshipping has its advantages and disadvan-
costs $50. You build an online store to sell it at a price
tages.
of $60. With every order, you would receive $60, $50 of
which you would give to the supplier, who handles the
strengths is the low upfront cost associated with start-
distribution and the backend of orders. The drop ship-
ing your business. While traditional brick-and-mor-
per, thus, is simply a middle man.
tar businesses require substantial amounts of upfront
capital investment, dropshipping is less demanding.
In 2018, the global dropshipping industry was
valued at 102.2 billion USD, and it is expected to register
7
Entrepreneur Illustrated | Feature
Perhaps one of the dropshipping’s greatest
Compared to traditional business expenses, the cost of
