I recently had the opportunity to address a group of bright young minds, freshly out of college and eager to kickstart the next phase of their lives. While hearing about their career aspirations, one of them mentioned starting a small business of selling customised phone cases. Intrigued, I asked about inventory and shipping management, ready to offer some seasoned advice. To my surprise, they replied, “I don’t handle any of that. I’m dropshipping,” and proceeded to explain their streamlined business model. I was impressed by the elegance of this approach, allowing them to venture into entrepreneurship with minimal upfront investment.
This encounter sparked my curiosity, leading me to dive deep into the world of dropshipping. What I uncovered was a fascinating blend of old-school business acumen and cutting-edge technology that’s reshaping the e-commerce landscape.
Today, I’d like to share these insights with you. In this newsletter, I cover:
- What is dropshipping, and how does it work?
- The origin of dropshipping (you’ll be surprised!)
- Dropshipping market: A booming industry
- Benefits and drawbacks of dropshipping
- What it takes to establish a dropshipping business in India
- The Indian dropshipping landscape and key players
- Shopify: From startup to dropshipping titan
Let’s dive in!
What is dropshipping?
At its core, dropshipping is a retail fulfilment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly.
Who is a dropshipper?
A dropshipper is an intermediary between the manufacturer or wholesaler and the end customer. They create an online storefront, curate products, market them to potential customers, and process orders. However, they never physically handle the inventory.
But did you know that dropshipping isn’t a novel concept birthed by the internet age? Its roots can be traced back to the 1960s and 1970s when mail-order companies pioneered this innovative fulfilment method!
The origin of dropshipping: Not just a millennial invention
Retail giants like JCPenney and Sears were among the early adopters. They used their extensive catalogues to showcase products shipped directly from manufacturers to customers.
The concept was simple yet revolutionary: these companies could offer a wide range of products without the need for extensive warehouse space or inventory management. As we fast forward to the digital era, this model has been supercharged by the internet, giving rise to what we now recognise as modern dropshipping.
Dropshipping market: A booming industry
The dropshipping market has experienced exponential growth in recent years, fueled by technological advancements and changing consumer behaviours. Let’s look at some eye-opening statistics that underscore the magnitude of this phenomenon:
- In 2024, the global dropshipping market is forecast to reach a staggering USD 351.8 billion. This marks a significant milestone as it’s the first year the market is set to surpass the USD 300 billion threshold, representing a 23.6% increase from 2023’s figures.
- Looking ahead, the future seems even brighter. Projections indicate that the global dropshipping market is poised to exceed USD 2.2 trillion by 2033. This astronomical growth trajectory speaks volumes about the sustainability and scalability of the dropshipping model.
- Geographically, the Asia Pacific region is expected to dominate this market. The rapid digitalisation, increasing internet penetration, and a burgeoning middle class with growing disposable incomes make this region a hotbed for dropshipping opportunities.
These numbers aren’t just impressive; they’re indicative of a seismic shift in the retail landscape. As traditional brick-and-mortar stores grapple with changing consumer preferences, dropshipping has emerged as a viable alternative that bridges the gap between consumer demand and product availability.
The entrepreneurial wave: Millennials and Gen Z embrace dropshipping
Did you know that a whopping 68% of dropshipping stores are run by these two generations combined? Let’s break it down:
- Gen Z (born 1995-2010) operates 38% of dropshipping stores
- Millennials (born 1980-1995) run 30% of these businesses
But why is dropshipping so appealing to younger entrepreneurs? Here are a few key reasons:
- Low entry barrier – No need for a physical storefront or inventory management.
- Low initial cost: Begin with minimal financial investment.
- Tech-savvy edge: Naturally skilled with online tools and platforms.
- Flexibility: Work from anywhere, scale easily.
- Niche exploration: Easily test and switch between product categories.
Apparel dominates dropshipping
In 2023, the apparel market generated a staggering USD 1.74 trillion in revenue worldwide, with dropshipping playing a significant role. What’s more, 26% of the top 1% of dropshipping stores are apparel-focused. Why is it so?
The answer lies in its perfect fit for the model:
- Customisation potential: Offers many options for unique designs
- Ever-changing trends: Constant demand for new styles
- Shipping friendly: Lightweight and easy to package
- Youth appeal: Popular among younger, online-savvy shoppers
As we look to the future, the dropshipping market shows no signs of slowing down. For young entrepreneurs willing to innovate and persevere, this dynamic field offers a world of opportunities to turn their e-commerce dreams into reality.
What does it take to establish a dropshipping business?
According to Qikink, an insights platform for entrepreneurs, here’s what it takes to set up a dropshipping business in India:
- Initial investment: INR 8,000- INR 15,000
- E-commerce platform:
- Shopify Lite: INR 1,994/month (20% savings with annual plan)
- WooCommerce: Free plugin (hosting INR 2,000- INR 5,000/year)
- Domain name: INR 500- INR 1,000/year
- Payment gateway:
- Razorpay: INR 2/transaction + gateway fees
- Instamojo: INR 2 + 2% per transaction
- Design & branding:
- Free logo tools available for DIY
- Product image editing: INR 500- INR 1,000
- Marketing tools (optional):
- Email marketing (Mailchimp, Zoho): INR 500- INR 1,000/month
- Social media schedulers (Buffer, Hootsuite): INR 200- INR 500/month
- Paid advertising:
- Google Ads & Facebook Ads: Start with INR 500- INR 1,000/month
- Google Ads & Facebook Ads: Start with INR 500- INR 1,000/month
Two approaches to begin dropshipping
- Building your own store: This involves creating a standalone e-commerce website using platforms like Shopify or WooCommerce. It offers more control over branding and customer experience but requires more upfront work.
- Leveraging existing marketplaces: Platforms like Amazon, eBay, or Flipkart allow sellers to list products without creating a separate website. This approach is quicker to start but comes with more competition and platform fees.
The Indian dropshipping landscape
The dropshipping market in India is currently estimated to be worth USD 1 billion. It’s projected to grow at a CAGR (compound annual growth rate) of 25% over the next 5-7 years. By 2028, the market size is expected to reach USD 5 billion. These figures highlight the significant growth potential of the dropshipping sector in India’s e-commerce landscape.
The dropshipping market in India is experiencing rapid growth, fueled by several key factors:
- Digital India initiative: Government efforts to increase internet penetration have created a fertile ground for e-commerce.
- Growing middle class: Rising disposable incomes have led to increased online shopping.
- Mobile-first population: With over 750 million smartphone users, India offers a massive market for mobile commerce.
- Improved logistics: Advancements in delivery infrastructure have made it easier to reach customers in remote areas.
Key players in the Indian dropshipping market
- Baapstore: A comprehensive platform for e-commerce ventures, providing dropshipping services for Indian products. It offers a selection of over 50,000 products, supported by a country-wide delivery network, and includes a catalogue of 4,000+ SKUs.
- Sourceinfi: A technology-focused dropshipping solution connecting marketers with Chinese suppliers. It provides Shopify integration, efficient order fulfilment and works with marketers to develop D2C brands in specific categories.
- Trade India: An established B2B dropshipping platform with two decades of experience. It facilitates connections between manufacturers and retailers, offering a marketplace for product promotion on a global scale.
- Roposo: A platform allowing entrepreneurs to operate without managing inventory. Its Roposo Clout plugin for Shopify helps streamline online business operations, enabling selling and revenue generation.
Shopify: From startup to dropshipping titan
When Shopify first launched in 2006, it catered to small businesses looking for an e-commerce platform. Today, it’s a powerhouse enabling over 2 million merchant stores globally, with dropshipping as a key driver of its success. Shopify’s rapid rise is no accident—it has skillfully positioned itself as the go-to platform for entrepreneurs embracing the dropshipping model, providing easy integration with suppliers and comprehensive automation tools.
How Shopify’s dropshipping empire grew
Shopify’s Gross Merchandise Volume (GMV) reached USD 235.9 billion in 2023 — an impressive 20% year-over-year growth. Their total revenue increased 26% to USD 7.1 billion compared to 2022. The platform’s ability to facilitate high-volume transactions has made it a central player in the global dropshipping ecosystem.
Shopify continues to be the leading platform for dropshipping businesses, especially in the United States, where 62.8% of Shopify-based stores are located. Canada holds the next largest share at 8%, followed by Australia at 7.4%, highlighting its strong presence in the global dropshipping market.
Shopify’s commitment to providing seamless supplier integrations, like Oberlo, and automating inventory and order management, has made it the platform of choice for modern entrepreneurs. It’s this adaptability that has cemented Shopify’s dominance in e-commerce and dropshipping alike.
In summary:
As we conclude our exploration of dropshipping, it’s evident that this business model represents a significant shift in the retail landscape. While its roots lie in the past, its future is being shaped by digital-native millennials and Gen Z entrepreneurs who are leveraging technology to redefine commerce. The beauty of dropshipping lies in its accessibility, allowing aspiring entrepreneurs to venture into business without risking substantial capital.
However, it’s crucial to remember that successful dropshipping isn’t about getting rich quickly. It’s about building a sustainable business through smart product selection, effective marketing, and exceptional customer service. Whether you’re looking to diversify your investment portfolio or start a side hustle, dropshipping offers an intriguing avenue worth exploring. I encourage you to dive deeper, understand the nuances, and perhaps even test the waters with a small venture.
Disclaimer – The information contained in this document is for informational purposes only.