If you’re a complete beginner but want to know the success rate of dropshipping before pursuing this business model, this article is for you!
Whilst nobody can be certain of the exact success and failure rate of dropshipping businesses, I will provide you with close estimates of why the success rates have declined and how you can drastically increase your chances of success.
What is Considered a Successful Dropshipping Business?
If a dropshipping business makes $50k in 6 months but then has to close down due, is that considered a success? If a dropshipping business consistently makes $500 per month, is that considered successful?
Every business is different and everyone’s idea of success is vastly different. Many drop shippers focus on product cycling which consists of selling trending products and continually transitioning their business to suit the next trend.
The store may only show short-term success until it is closed down and a new store re-opened. These merchants would consider $20k net profit in 3 months a success.
Others are looking for a long-term and sustainable business that can bring them consistent income for years to come. A store closing down within 3 months would be considered a failure to these merchants. The success of a dropshipping business can be subjective depending on the owner’s goals and experience level.
For some successful examples, I suggest you read my article on branded dropshipping stores.
What is the Success Rate of Dropshipping?
According to Shopify, experts estimate the success rate of a dropshipping business is anywhere between 10% and 20%. The problem is that nobody really knows for certain and estimates are still guesses. For starters, it can be difficult to know which stores are actually dropshipping and what your exact definition of dropshipping is.
There are many online stores that buy in bulk but have fulfillment centers that ship their products individually on their behalf. Some people would argue that is dropshipping whilst others would argue that buying in bulk at wholesale rates is not dropshipping. I’ll let you decide.
I will however take some educated estimates based on my experience in the industry since 2016. Personally, I would consider success in dropshipping as someone who makes over $4k per month for a minimum of 1 year, so I’ll use that as my metric for success.
For someone starting a dropshipping business in 2023 and using AliExpress as their main supplier, the chance of success would be under 5% and closer to 1%. However, if AliExpress is used in the short term for testing before transitioning to buying in bulk, the chances of success are closer to 10%.
For more info, I have an article on the 9 most common problems with dropshipping from AliExpress.
To start a Shopify store, dropship from AliExpress and continually bring in consistent income for over a year in 2023 is very unlikely. There is far more competition, the cost of advertising has risen and AliExpress suppliers are notoriously unreliable which causes a poor customer experience.
If you attempted the same dropshipping business in 2016, the chances of success would be 25% or higher. Back then, the AliExpress dropshipping business model was uncompetitive and advertising prices were much lower.
Below is the search term “Dropshipping” on Google Trends from 2016 to 2023. It’s easy to see how popular and competitive dropshipping has become and why the failure rate is much higher.
High ticket dropshipping from domestic suppliers is another subsection of dropshipping and e-commerce that many merchants pursue. The success rate of this type of dropshipping is higher than the typical AliExpress business model you may be more familiar with.
According to experts in the high ticket dropshipping space, the success is between 10% to 20%. The success rate is higher because they are selling evergreen products that consumers need instead of trends, the products are higher quality brands and high ticket dropshipping is less competitive.
At the same time, the failure rate with high ticket dropshipping can be high in the early stages. Selling expensive products requires more trust and this can be a difficult practice in the early stages of business.
As you can see from the screenshot below, the search term “High ticket dropshipping” has not exploded like “dropshipping” since 2016. This makes the competition lower which is another factor in the success rate being higher.
Why is the Success Rate for Dropshipping So Low?
The success rate for dropshipping is low which means the failure rate is high. As a beginner, you need to understand why the failure rate is so high so you know how best to navigate around these obstacles to give yourself the best chance of success.
1. Competition is the number one reason why failure rates with dropshipping have risen. It’s simple, the more competitors there are, the more difficult it is to compete which leaves a smaller percentage of merchants succeeding.
2. Online gurus making dropshipping appear far easier than it actually is. Beginners fall for the trap of believing dropshipping is an easy way of making money online before pursuing it themselves and failing.
3. A limited understanding of marketing a dropshipping store. Using Facebook and Google ads can be complicated and beginners fail due to not fully understanding how to run and optimize ads effectively.
4. Copycats replicating a store’s success. With so many tools that allow spying on competitors, it’s difficult to hide a dropshipping store’s success. This often results in other merchants copying a store’s products, website and ads and stealing a lot of their traffic and sales.
5. Online shoppers are getting better at identifying dropshipping stores and avoiding them. It’s difficult to succeed when a store is using a free Shopify theme, uses generic images and product descriptions, sells typical trending products and runs similar ad campaigns as other stores.
6. A common mistake that increases the failure rate is beginners trying to start a dropshipping business with little or no money. Whilst there are a few unavoidable small costs, the biggest initial outlay will be for advertising. Trying to drive traffic to a new store without paying for ads will inevitably end in failure.
My related article you might enjoy:
How to Increase Your Chances of Success with Dropshipping?
The success rate for beginners in dropshipping is low, however, for experienced drop shippers, the success rate is far higher. Most successful drop shippers don’t have one profitable dropshipping store, they often have a portfolio of profitable dropshipping stores.
They have clearly learned the process, understand what works and what doesn’t work and simply replicate the fundamentals to give them their best chance of success. So what are they doing differently?
1. Successful dropshipping stores have something unique about the business that allows them to stand out from competitors. This could be in the form of the product or niche they’re selling, the type of advertisements they’re running or the audience they’re targeting.
2. Experienced drop shippers look for gaps in the market and exploit them. This could be a product that solves a specific problem and they’re providing a solution or a feature of an already popular product that has not yet been exposed to the target audience.
3. Another gap in the market is the audience they target for specific products. Often merchants will look at successful dropshipping businesses in the USA that have not yet targeted a worldwide audience. They then copy a similar business model but target all the countries the successful store is not yet targeting.
4. One of the most important and neglected strategies for long-term success with dropshipping is to make your business as difficult as possible to replicate. This is typically done by building a brand and working with suppliers who can give you exclusive rights to your products, creating a social media presence and making custom content, images and videos.
5. Do your research and create a business plan. This includes doing product research, market research and creating a plan that can help differentiate you from the competition.