We’re heading into the 2nd half of 2020 in a few days, and boy, is this an exhausting year or what? It feels like we crammed 5 years of events into half a year, and it ain’t even over yet. With the pandemic heading firmly into Wave II territory (Except for US, which hasn’t left wave I!), and cross border travel for both humans and goods taking a hit, does this spell the end of the Aliexpress dropship model?
For those of you who are not familiar with this model, It’s basically product arbitrage, where you purchase cheap products from China via Aliexpress, and resell it to people in other markets at a markup, most of the time with the product not even touching your hands. This is called the Dropshipping model. A customer orders from your website, you order from Aliexpress and ship it right to their address whilst pocketing the difference.
Factory shutdowns and freight delays
Don’t get me wrong. I have nothing against dropshipping. It is a totally fine model. But Aliexpress has long had a reputation for crappy products that barely lasts 2 weeks, and shipping durations are horrendously long, even in good times.
When you put in potential factory shutdowns into the equation, things get doubly uncertain, and you may even wonder if dropshipping is now a viable Business model if you source your supplies from overseas.
I’ve personally started my own dropshipping business in the past, and while it certainly brought it revenue, costs were underestimated, and advertising costs turned out to be the killer in the venture, even with a seemingly winning product.
Dropshipping as a business
I have no doubt that dropshipping as a business overall works, and there are ways to reduce shipping risks (that increase business overheads), and if you take the time to really find a great supplier, you can definitely make it work.
But as consumers get more savvy to these “Just pay shipping” ads, by and by, they will be able to tell apart quality products and cheap knockoffs.
A lot of dropshippers are using the ShopifyXAliexpress model to start their businesses. I’m not sure what percentage of shopify users are these, but I think they will struggle to survive, especially in this environment. As it is, reading stories from reddit, the churn from these types of businesses are already pretty high, where most people don’t survive the first year of business.
Reality of life
Unfortunately, the reality of life is such that businesses with a relatively low barrier to entry will definitely see many entrants. Everyone will be eager to try it out, and everyone will think they are different than others who have come before.
That is totally fine, as long as you take out certain lessons in your venture. I’m all for learning through doing, and many people have said that the pandemic offers a unique opportunity (if you’ve been unfortunately affected) to take a step back or learn some new skills and take on some new challenges.
But if you’re thinking of going the ShopifyXAliexpress route, maybe keep it to research until the supply chain goes back to normal.