dropshipping

May 16, 2022

Covid completely upended the entire e-commerce world—and the dropshipping industry was no exception. Thankfully, after a long and unpredictable road, it finally seems like Covid is on the way out, and we’re back on the path to normalcy.

Since Covid appears to be on its last legs, many new questions about the dropshipping industry have come to the surface. Dropshippers are asking: What does dropshipping look like in a post-Covid world? How have things changed? How can we set ourselves up for success in the future? And how can we know what to expect?

This article will answer the questions above and provide insight into what dropshipping is going to look like in the post-Covid world. We’ll also dive into the current state of affairs that’s contributing to the changes we’re experiencing. 

Inflation

In order to conceptualize what dropshipping is going to look like post-Covid, it’s crucial to have a firm grasp of where we stand now in terms of inflation (as of May 2021). Here’s what we know: 

  • Inflation is currently the highest it’s been since 2008—a year when things were extremely expensive, and the economy was crashing.
  • This high level of inflation could be permanent or temporary. But, it appears that we are going to continue to see increases in prices for consumer goods.
  • Increased prices will have an impact on the dropshipping business, even if we don’t see hyperinflation.

The good news is, if prices of goods rise due to increased manufacturing costs, you won’t be the only one who needs to raise their prices. Rather, everyone will be responding to inflation. You can still profit by selling for suppliers and enforcing minimum advertised price (MAP) policies.

The bad news is, even if this period of inflation does turn out to be temporary, once prices go up, they rarely go back down. Once again, you can keep your margins safe by working with MAP suppliers. This will ensure you don’t have to raise your prices beyond what your competitors are selling for.

Labor Force

Based on data from April 2021, the number of people in the workforce increased by 266,000—which was significantly below estimates. Based on this data, it’s also important to note that there are about 10 million people in the USA that are eligible to work, but who aren’t currently working. 

This might seem concerning, but it’s important to note that there are jobs available. In fact, many companies are struggling to fill positions and bring people back to work. 

From a dropshipper’s perspective, the idea of people not working is especially troubling. Due to the worry that unemployed people won’t be able to afford products. Here again, it’s critical to recognize that there is a surplus of jobs available - particularly for jobs that require specialized skills and degrees. And companies are going to great lengths to fill these positions. 

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In many cases, the jobs that aren’t being filled tend to be lower-paying or minimum wage positions. The lack of workers for these types of jobs is so bad that some companies are offering financial incentives just to get people in the door. One example is McDonald's paying $50 for people to come in for an interview—regardless if they even get/take the job. 

It’s important to recognize this distinction because most dropshippers market and sell their products to people in the upper-middle class. These are typically households with a combined income of $150,00 or more. This demographic is working, and therefore their purchasing power isn’t decreasing. 

Gasoline

One frightening situation we’re currently facing is the gasoline shortage. Many gas stations can’t get gas, and the ones that can have had to increase their prices. This can be attributed to the recent hacking of the Colonial Pipeline, and will hopefully prove to be temporary and short-lived. 

Despite the temporary nature of the current shortage, gas prices directly impact shipping costs. It is something that’s important for people in the dropshipping business to monitor closely moving forward. 

Changes in the E-Commerce Landscape 

On the bright side, there are many positive developments occurring in the world of e-commerce. In fact, the entire industry looks radically different than it did even a year ago. Take a look at these facts and figures: 

  • In 2019, e-commerce sales in the US were worth $598 billion.
  • In 2020, e-commerce sales in the US rose by 44%—to a whopping $861 billion.
  • Many consumers moved to buying things online as a result of the pandemic, and are still continuing to do so.

As a dropshipper, if you’re providing a great customer experience, you’ll be able to retain your business—even as brick-and-mortar stores re-open. Many people are now used to buying things online. This expanded customer base makes the future of e-commerce incredibly bright.

Add this changing landscape to the fact that people are actually making more money than they were before. And dropshipping can be an even more valuable and lucrative source of income than ever. Data shows there’s been a 4.1% increase in average weekly earnings over the past years. This helps offset inflation and will keep people purchasing from your store. 

Online Advertising 

Although this aspect of dropshipping isn’t directly related to Covid, online advertising is in the process of changing. If you run a dropshipping business, you’re probably already aware of the major changes that happened in terms of Facebook ads due to Apple and iOS tracking

The recent changes have made people uneasy. Conversions aren’t tracking nearly as well as they used to, and audiences for e-marketing aren’t filling up like they once did.

This can be attributed to the fact that 96% of iPhone users that updated to the latest version of iOS opted out of ad tracking. Even though advertising through Facebook is still a great tool, this new development is impacting how people are going about their online ad strategy. 

Direct response advertisers can no longer rely on simply putting up an advertisement that they know the viewer will be interested in, since they don’t have the same access to user data. 

From the consumer perspective, many people’s initial response to this policy change was to praise Apple. However, the reality is actually more complicated. Apple just hired Antonio Garcia Martinez, who was an extremely instrumental figure in the building of Facebook and its ad platform. He’s also the author of a book called Chaos Monkeys.

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Apple hired Martinez to work on Apple ads—which isn’t being used heavily for direct marketing at this time. However, this recent addition to the team (along with a surge of other new hires) indicates that Apple is ramping up its e-commerce marketing—and may soon likely dominate the online advertising space. 

This is something to keep a close eye on because having the ability to target every iOS user would undeniably have a major impact on the dropshipping industry. 

Business Owners Need to Change with the Times 

This article has covered a plethora of information about what dropshipping is going to look like in the post-Covid world. The main takeaway here is that as a business owner, you need to be aware of what’s happening in your niche, in the economy, and with your buyer’s demographic. Doing so will allow you to adapt, pivot, and ultimately succeed. 

Being able to change with the times in an informed and strategic way will not only allow you only to survive during tough times but also to thrive and capitalize on new developments.

Need help picking a niche? 

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About the author 

Anton Kraly

Anton is a the Founder & CEO of Drop Ship Lifestyle - an online coaching program for eCommerce entrepreneurs. He began selling online in 2007 and has built and sold multiple seven-figure businesses while leveraging the power of drop shipping.

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