The Total Addressable Market (TAM) for Dropshipping was valued at USD 212.75 billion in 2021. It is expected to reach USD 2018.16 billion by 2030, growing at a CAGR of 28.4% during the forecast period (2022–2030). Dropshipping is a business model that allows operating a store without keeping any stock. After a sale is finalized, the supplier will transport the purchased items from your storage facility directly to the buyer's doorstep. Not once will a person have to stress over shipping, storing, or packing their belongings. With the help of numerous mobile applications, smartphones have completely changed how people shop online. The e-commerce market is expanding, fueling demand for dropshipping services due to the increasing penetration of smartphones and consumers' rising disposable income. Due to the rise in consumers favoring online shopping platforms, significant players in the e-commerce industry have increased their investments noticeably, benefiting the market growth.
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Rising use of Smartphones along with Better Network Connectivity
The market's primary drivers of the dropshipping market have been the rapid adoption of smartphones and improved internet access across developing nations. Users of smartphones have easy access to various e-commerce applications that allow them to browse and search for products and conveniently place orders from a distance. Urban areas have been using smartphones for more than ten years, and rural areas have adopted them more frequently in recent years. The widespread availability of products made available by smartphones has ensured a shift in rural people's attitudes toward online shopping in developing nations and increased the use of smartphones for online shopping.
Increasing Disposable Income and Online Shopping
E-commerce platforms have become more prevalent in nations like India, Japan, China, and South Korea, primarily due to the noticeable increase in disposable incomes and simple access to credit. The demand for goods like smartphones and electronic appliances has been soaring across online stores as average salaries increase across developing economies worldwide. The market for consumer electronics and appliances in India reached USD 10.9 billion in 2019, according to the India Brand Equity Foundation (IBEF). Additionally, the easy and prompt availability of electronic products has been a critical factor in the market growth driven by India's initiative to permit 100% FDI in the electronics manufacturing sector.
Low-Profit Margins and Stress in Brand Building
The dropshipping business model generates low returns because it requires little initial capital outlay and little overhead. Dropshipping businesses have very low-profit margins for the owners because the supplier keeps a sizeable portion of the sale. In addition, expenses are incurred for managing sales orders, brand marketing and advertising, and website maintenance. The number of orders received and the discounts provided by manufacturers and wholesalers affect the profit. The only factors that influence order inflow are the reputation of the brand and the products it offers.
Retailers and owners of online stores compete fiercely due to healthy competition in the e-commerce industry. Businesses compete against one another by providing specialized and one-of-a-kind customers and discounts. Despite this, many competitors offer alternatives and could be fierce rivals. As a result, developing a brand identity in the dropshipping industry is challenging, and it is critical to keep up with trends to survive in the face of escalating competition.
The growing use of the Internet of Things to Support Effective Dropshipping
Dropshipping enables small business owners to grow their customer bases, diversify their product lines, and reduce inventory costs. Third-party logistics companies (3PL) are necessary for the dropshipping business model to ship products. As a result, the retailer does not influence the supply chain and has no idea how much inventory the supplier has. At this point, the Internet of Things (IoT) can help the retailer by providing real-time information about the supplier's inventory situation and updates on any on-the-shelf and off-the-shelf movement of a specific product in the supplier's inventory.
IoT-based solutions may enable functions like automatically ordering products from the manufacturer once inventory falls below a predetermined level to reduce the likelihood of a stock-out scenario with the supplier. Retailers can integrate Internet of Things (IoT) features into their online stores to identify popular products by gathering customer data, developing creative marketing strategies, targeting the right market, and boosting website traffic. Customers' shopping experiences can be improved by personalizing their layouts using customer data. As an illustration, a customer who frequently browses through various fitness bands might see suggestions for additional fitness products on the same webpage.
IoT can also improve payment gateway security, stop fraudulent transactions, and provide customers with a safe and secure online platform. In the long run, IoT can assist in streamlining the management of the entire supply chain, reduce costs, and guarantee the quality of products by isolating out-of-stock or damaged products. These elements are anticipated to motivate retailers to choose dropshipping and add IoT-based features to their online stores, supporting the market's expansion.
The global dropshipping market is segmented by product.
Based on the product, the global dropshipping market is bifurcated into toys, hobbies, and DIY, furniture and appliances, food and personal care, electronics and media, and fashion.
The fashion segment is the highest contributor to the market and is expected to grow at a CAGR of 35.6% during the forecast period. In the dropshipping market, the fashion segment is anticipated to grow favorably as a result of rapid globalization and modifications in consumer spending habits. It is also anticipated that the fashion segment will be driven by rising consumer preference for branded goods and the accessibility of multiple brands on a single platform.
Since consumers can compare a wide range of products, get discounts, and take advantage of easy returns, the growth of e-commerce platforms opens several opportunities for selling electronic goods, which helps the dropshipping industry. Additionally, the increased availability of reasonably priced electronic goods has made it possible for online retailing to access previously inaccessible locations. As a result, there is a substantial global implementation of such dropshipping services.
By region, the global dropshipping market is segmented into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
Asia-Pacific Dominates the Global Market
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Asia-Pacific is the most significant shareholder in the global dropshipping market and is expected to grow at a CAGR of 37.7% during the forecast period. The Asia-Pacific market is anticipated to grow significantly over the forecast period due to the region's expanding economy, sizable consumer base, and rising number of producers of various end-user products, such as textiles, furniture, and electronics. The adoption of smartphones has increased internet connectivity, which is responsible for expanding online retailers across the Asia-Pacific region. By 2025, the Asia Pacific region is expected to have 3,900 million smartphone devices, according to the Global System for Mobile Communications Association (GSMA). The expansion of e-commerce businesses in the area, which subsequently fuels demand for dropshipping services, is credited with regional market growth. Rapid expansion in the Indian e-commerce market over the past few years has prompted a rise in the number of startups catering to this sector. This is also anticipated to favor the demand for dropshipping services in Asia-Pacific over the forecast period.
North America is expected to grow at a CAGR of 33.3%, generating USD 882.8 billion during the forecast period. Dropshipping is becoming increasingly popular because it saves money and requires less capital. It is predicted that the North American market will expand at the fastest rate during the forecast period. As a result, many dropshipping businesses have sprouted up over the past few years in the United States and Canada. It is also predicted that having a variety of market participants in the area will accelerate market expansion. Due to changing consumer habits and market trends like voice-activated virtual assistants and chatbots, as well as mobile e-commerce, the North American market is predicted to grow significantly.
Additionally, advantages like a simple ordering process and returns draw customers to online shopping platforms. Dropshipping services allow businesses to save money on inventory and concentrate on their core competencies, such as marketing. Using a drop shipper enables these startups to compete with more established businesses despite having fewer resources. E-commerce startups have been a significant driver of dropshipping's expansion thanks to the advantages listed above.
The global dropshipping market’s major key players are Alidropship.com, Doba, Inc, Chinabrands.com, Megagoods, Inc, MODALYST, INC, Oberlo, Shopify, Inc, SaleHoo Group Limited, Sunrise Wholesale Merchandise LLC, and Wholesale2b.